Israel Attacked – What’s Next for Markets?
Israel's delicate peace has been breached and the whole world is polarizing and taking sides. Is this the beginning of... something?
If this escalates, what sectors of the economy will plunge and which will surge? What about supply chains? Travel? Communications? The power grid? Reserves in Israel are being called up. Sabres are rattling the world over. Will the violence spread?
You may have squared away your emergency food stash and your go bags. But what about money? Do you have an emergency stash of that? As the world goes all digital and cashless, what happens when the power goes out? Does your entire portfolio and access to funds depend on the power grid? Does it also depend on our government keeping a cool head about money during a time of panic?
Is your net worth reliant on panicked politicians NOT writing another flurry of blank checks and further inflating away your purchasing power? It doesn't have to be this way.
In times of global uncertainty and turmoil, the world often turns to gold as a haven of stability and a store of value. Throughout history, gold has proven to be a timeless asset that shines brightest during periods of war and global conflict. Gold is often referred to as a “safe-haven asset,” and for good reason. When international tensions rise and the drums of war beat louder, many investors flock to the relative security of gold. It serves as a reliable store of value when traditional investments become uncertain.
If you are concerned about your portfolio during this time of escalating global conflict, you should look at the compelling relationship between geopolitical unrest and the rise in gold prices.
The Historical Connection
Gold’s relationship with war and global/economic conflict stretches back centuries. But consider more recent history:
In the aftermath of September 11, 2001 gold doubled in less than 5 years. It was $272 in August 2001 and climbed to $549 by January 2006.
It doubled again during the housing crisis of 2008, going from $665 in August of 2007 to $1346 in October of 2010.
A Precious Metal for Precarious Times
Gold tends to flourish in the face of chaos, making it a preferred investment choice during periods of war and global strife. When the world teeters on the brink of conflict, investors and central banks alike seek refuge in the reliability of gold. Geopolitical uncertainty, whether sparked by territorial disputes, civil unrest, debt crises or diplomatic tensions, drives up the demand for this precious metal. The “fear factor” leads investors to diversify their portfolios, safeguarding their wealth with an asset known for its tendency to even out the rough patches in their portfolios.
Currency Devaluation vs Unprintable Gold
War and global conflict often lead to currency devaluation and economic turmoil. Governments often resort to printing more money to fund their military outlays, resulting in inflationary pressures. They can't print gold though. As paper and digital currencies lose value, the purchasing power of precious metals can remain intact - or even appreciate.
A Safe Haven and Diversifier Amidst Market Volatility
Stock markets can become turbulent during times of conflict, with equities experiencing sharp declines. Gold, with its intrinsic value and time-tested stability, offers investors a safe haven to protect their wealth when traditional investments falter.
Smart investors understand the importance of diversification. In uncertain times, gold serves as an essential component of a diversified portfolio, helping to shield assets from the potentially corrosive effects of geopolitical upheaval.
The Mechanics of Gold’s Ascent During Conflict
- Demand Increased:
Global conflict can intensify fear and uncertainty. Investors and governments increase their demand for gold as a hedge against economic instability. This heightened demand drives up prices.
- Supply Disrupted:
At the same time, wars and conflict can disrupt gold supply chains. Mines may be abandoned as resources are reallocated to war efforts. Transportation routes can become unsafe, leading to reduced gold production. Supply constraints can then further boost gold’s value in a vicious cycle.
Purchasing Power Differential
But it is not only gold supply chains that can be compromised. Supply chains for everything are under the same pressures, further exacerbating inflationary price hikes throughout the economy. Remember hearing about WWII ration books?
War can make quick work of your life savings as these three factors feed off each other. Having some gold can mean having some peace of mind during rough times. It's no wonder central banks are stocking up on gold - and not advertising that fact. Why would they sing the praises of gold? It would just make it more expensive FOR THEM. Read the fine print of what they are doing. Take it under advisement. You can do the same.
History has demonstrated that gold shines brightest when the world is at its darkest. In these turbulent times, elite investors and central banks alike continue to turn to precious metals as a symbol of stability, security, and enduring value-a beacon of hope amidst the storm.
Skeptical investors should keep a watchful eye on global developments and consider the protective allure of gold in their portfolios. As the present world challenges continue to unfold, remember that gold remains an enduring store of value in uncertain times.
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