Gold’s Jump After Volatile Market Week Shows Safe Haven Potential
Posted By | March 30, 2018
The trading week ending March 23 provided investors with revealing insight as to gold’s potential to thrive during periods of economic uncertainty.
We talk frequently about that potential, and for good reason. Precious metals have historically demonstrated the capacity to become stronger when negative conditions engulf the financial landscape. In the post-World-War-II era, gold and silver have demonstrated the tendency to move well during periods of economic upheaval. One noteworthy example can be found in the decade of the 1970s, when the U.S. government struggled mightily to bring inflation and unemployment under control. From January 1970 to January 1980, while the Dow Jones Industrial Average rose an anemic two percent, gold and silver soared respectively roughly 1,500 percent and 2,100 percent.
There are other examples of gold and silver flying high in times of economic distress, including during the last significant economic downturn. In the nearly 2½-year period from November 2008 through April 2011, while much of the world was mired in economic cement, gold climbed about 110 percent and silver rose nearly 400 percent.
Now it’s March 2018, and a growing number of indicators point to the increased likelihood of another major financial crisis. And the behavior of the Dow and gold on Friday, March 23 gave investors a good look at gold’s potential as a genuine safe haven when market clouds turn dark.
The markets entered that week already shaky. There has been talk for months that interest rates would be hiked as many as four times in 2018, and President Trump had already enacted tariff proclamations on steel and aluminum imports. On Wednesday, the Fed, fulfilling the somber expectations of stock investors, went ahead with its first rate increase of the year and emphasized there would be more to come.
The next day, Thursday, the president took great strides, some would say, toward ensuring a trade war with China when he announced onerous tariffs on imports from the world’s second-largest economy.
So, after a week full of trying news for stocks, how did the equities markets and gold react on Friday? Take a look:
Performance of Gold vs. DJIA on March 23, 2018
Chart courtesy of StockCharts.com
In near-perfect symmetry, gold rose almost as much as the Dow dropped. On a day when the equities market reflected the stresses and strains of the week with a pronounced drop in value, gold, with equal clarity, showed its potential not only as a safe haven but as an asset that can increase while the stock market is tanking.
Even today, with the advent of a new asset class – digital currency – as well as an enormous number of options now available within longstanding asset classes such as equities, it is precious metals that reliably offer investors an opportunity to enjoy effective diversification during a financial crisis.
Would you like to know more about precious metals’ potential to create a safety net? Call Augusta Precious Metals today at 855-242-4121 to speak with a retirement specialist about the ways physical gold and silver can fortify your IRA or 401(k). Don’t get blindsided when there’s a market correction…or worse. At Augusta, we specialize in helping you acquire inflation-protected assets that have an ability to keep your portfolio moving forward, not only in a climate of higher interest rates but throughout a variety of economic environments hostile to equities and other traditional assets.
We’ve seen the divergence of gold from equities countless times in the past. We saw another example of it again on March 23. As the news seems to only grow worse for the stock market, we believe the price of gold – and silver – could respond even more favorably.
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