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Gold Strengthens with Recent Threats, Proves Safe-Haven Value

Posted By Isaac Nuriani |

People turn to safe havens for protection from trouble. For retirement savers, safe havens are assets and instruments that protect portfolios from the volatility that bedevils financial markets. The best safe-haven assets, like gold, have strengthened when bad economic news has triggered market volatility or threatened the dollar. But these assets also have thrived during massive social unrest, geopolitical crises and global health emergencies. That’s because even noneconomic turmoil on a large enough scale can upset the global economic order.

Time and again, gold has demonstrated its potential to gain value when the financial system’s stability is threatened.

Over the last 16 months, varied negative influences on the global economy and stable financial markets have arisen. This includes volatile global financial markets in Q4 2018 and the 2019 Federal Reserve decision to lower interest rates. It also includes the recent exchange of hostilities between the U.S. and Iraq and the coronavirus outbreak. In each case, gold demonstrated its value as a safe-haven asset by growing in value. These recent performances signal to retirement savers the importance of embracing the strength of gold.

 

Both Economic and Noneconomic Threats Strengthen Gold

The year 2018 saw equities post their worst performance in a decade. Worries about the global economy, the China-U.S. trade impasse and overvalued financial markets finally registered with stocks. It was the sell-off in the year’s 4th quarter, specifically, that did the damage. The worst of it hit in December, when the Federal Reserve indicated they would maintain their existing tightening posture on interest rates. Global markets fell apart. The MSCI World Index tumbled 14% in the last three months of 2018. Fortunately, gold strengthened the way retirement savers count on it to do when markets sink: Gold surged close to 8% during the quarter.

In Q4 2018, global financial markets tumbled 14%, their worst single quarter since 2011. Gold jumped nearly 8%.

Performance of Gold – September 30, 2018 through December 31, 2018

 

(Chart Courtesy of StockCharts.com)

Fast forward from the end of 2018 to June 19 of last year. Federal Reserve Chairman Jerome Powell announced the central bank would reverse course and begin lowering interest rates. Anticipating a resulting weaker dollar, gold strengthened profoundly. In a scant eight weeks through August, the metal jumped nearly 12%, from 1,342 dollars/oz to 1,500 dollars/oz.

It’s not just economic-based factors that can throw retirement portfolios into disarray and cause gold strengthening, however. A wide variety of presumably noneconomic crises and concerns can do the same thing. Savers saw it happen in the last month and a half. When long-simmering tensions between the U.S. and Iran reached a boiling point in December, markets were rocked and gold surged. December 28 – January 8 marked the worst hostilities between the countries since the 1979 Islamic Revolution and hostage crisis. Gold rose 6.6%.

Then there’s the ongoing coronavirus global drama. In the last days of January, worries over the coronavirus’s possible effects on the worldwide economy gained critical mass. During this period, McDonald’s and Starbucks shuttered stores in China and the first U.S. person-to-person virus transmission was confirmed. The World Health Organization declared the outbreak to be a global health emergency. From January 24 to January 31, key financial indexes, such as the S&P 500, fell 3% while gold gained 2%.

 

Those with the Most to Lose Embrace the Strength of Gold – How About You?

There is no lack of credible enthusiasm for the strength of gold right now. Central banks ended 2019 having purchased the second-highest amount of gold in a calendar year over the last half-century. The world’s largest hedge fund, Bridgewater Associates, has been shoring up its gold position in anticipation of the metal hitting a new all-time price high in 2020. And legendary asset manager Mark Mobius said last year the global economic climate will remain so troubled that gold should be purchased “at any level.”

This optimism over gold’s strengths is based on the belief that global economic challenges will grow in size and scope shortly. It’s clear gold has the capacity to defend portfolios against a variety of globally disruptive influences. Is it safeguarding your portfolio?

Perhaps you recognize gold’s potential to protect your retirement savings but don’t own any of it right now. It could be time to contact Augusta Precious Metals at 800-700-1008. Let our friendly and knowledgeable customer success agents answer all of your questions about buying gold and silver. You’ll determine if you qualify for the Augusta Profit & Protect Web Conference hosted by lead economic analyst Devlyn Steele.

Mr. Steele has achieved many impressive accomplishments over a career of nearly 40 years. Most noteworthy may be his accurate forecasting of both the 2008 financial crisis and subsequent rise in gold and silver. In this one-of-a-kind presentation, he’ll share little-known disturbing facts behind why so few Americans achieve retirement goals. He also will share  how strategies such as a gold IRA can keep you on the path to financial independence.

It’s difficult to argue against the idea that gold’s strength can protect portfolios when global news turns bad. What’s less clear is why any earnest retirement saver would resist holding gold, given this power to protect. If a lack of information is all that’s keeping you from owning physical gold and silver, contact Augusta Precious Metals today.

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