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Worldwide, gold is still a safe haven for many investors. Past investment activity indicates that gold investments have corresponded with wartime activity in Russia, France, and Ukraine, and during the 2020 COVID-19 pandemic.
Top investors have even changed their negative opinions regarding gold investments, now seeing the clear benefits of the asset.
Why does gold remain a safe haven today? Many factors play into its popularity during global crises.
The Oxford Gold Group’s professionals explore why gold is a safe haven and detail past investment activity during wartime and other global calamities.
You can learn more about gold investments and ideal times to invest with the Oxford Gold Group.
Our team offers helpful insight into the gold bullion market and can assist you in making the right investment choice. Contact our experts today at 833-600-GOLD.
Understanding Safe Havens
A safe haven is an asset that maintains its value despite catastrophes or unexpected financial crises. Some people may confuse it with a “safe asset.”
Examples of safe assets include bonds and other investments that guarantee a stable, consistent return with interest, while safe haven assets represent less risky investments.
Safe haven assets change in price with global events. Typical safe haven asset behavior means prices rise during wartime or other crises, and previously popular investments decline significantly.
When life returns to normal, the safe-haven asset’s price will fall.
Gold is one such asset. With investment behavior over the past several years indicating that investors primarily purchase bullion during conflicts, gold’s price fluctuations corroborate this activity.
When looking for a less volatile asset to invest in, the answer proves simple for many investors worldwide: gold.
Over the past several years, gold has remained a consistent safe haven asset despite the pandemic giving rise to inflation. The only variation in its investment activity primarily occurred when the stock market crashed in March 2020.
What Makes Gold a Safe Haven?
As time goes on, investors continuously return to physical gold coins and bullion during wartime and other uncertainties.
Some believe this is for a good reason, while others believe gold is still too erratic. Despite these disagreements, investors continue to use gold as a safe place to hold value.
Gold is a safe haven for investors for many reasons, including:
- Past success
- Consistent store of value
- Higher buy-in prices
- Less volatility compared to stocks
- Vague pricing
- Many ways to invest
Dependable Store of Value
Gold is a dependable store of value for being plentiful yet finite enough to be valuable. Gold has maintained a consistent store of value throughout history due to its physical properties and scarcity.
Repeated good results have led investors to consider gold a safe haven asset.
Thanks to gold’s physical composition, it is durable and non-corrosive. It is malleable at lower temperatures and nearly unbreakable.
Because gold does not produce value, holding it during a crisis is what gives it its value.
Gold has been relatively stable and normalizes in price soon after the conflict ends. Because of its reliable store of value, the metal played an instrumental part in developing the gold standard for central banks.
Today, most worldwide gold is in central banks or government facilities, used for gold jewelry or electronic components, or owned by investors.
Gold’s price moves in the opposite direction as the dollar. The higher the US dollar’s value, the less currency is necessary to purchase physical gold.
Because of this, the pandemic’s arrival only strengthened investors’ belief in gold as a safe-haven asset.
Worldwide, gold’s historically high prices contribute to significant losses if the anticipated financial crisis doesn’t happen.
In the past, gold has had moments of volatility. For some top investors, this is enough to stay away from the asset.
Investing before a financial crisis could be beneficial, or you may lose a significant amount of money if the dollar’s value doesn’t change.
Gold’s initial prices are already high. Average prices remain around $600-$700 per ounce.
There is risk involved due to the higher entry point for gold investments. Average prices are less likely to increase, meaning you could sell your gold investments for much less than the original price.
Many investors ignore these risks as statistics show gold investments have only grown with the 2022 Russia and Ukraine conflict.
Compared to the stock market, gold prices show less volatility. While gold prices can still be unpredictable, they follow a consistent pattern.
Since the 2014 Russo-Ukraine war, worldwide gold investments have only increased.
As volatility has decreased during the COVID-19 pandemic, investments activity stays high. Unfortunately, with history’s predictions, after each conflict dies, gold prices return to normal, indicating investments also drop.
This volatility is predictable enough for investors to make wise decisions without losing much money.
Compared to stock shares, those investing in gold lose less money. Gold shares are significantly more volatile than physical bullion’s price.
The evolving cost of bullion after world events isn’t enough to deter investors. Gold has remained in demand consistently throughout the pandemic, its aftermath, and into the Russia-Ukraine war of 2022.
Difficult to Understand Prices
Although gold investment seems simple, gold prices are challenging to understand. The most significant factors determining gold’s price include its physical supply and demand.
Other factors include investors’ preferences, viewpoints, and whether they feel secure in the gold market.
Supply and demand determine gold’s price as workers extract gold from mines. This non-renewable resource gains value with every ounce mined.
The scarcer gold is, the more valuable it will become.
Demand for gold rises after negative world events as people think to invest in a trusted asset. Many investors purchase gold out of fear.
This explains the drop in gold prices as inflation decreases.
Even highly-educated, skilled financial experts struggle to understand the price of gold. Valuating this metal relies on the dollar’s value and other tangible and intangible factors.
Despite the unknown, it’s still a safe haven for investors worldwide.
Many Ways to Invest
Gold is also a safe haven due to the many ways you can invest. Physical bullion and gold coins are popular investments but often have higher costs.
Finding secure storage methods and trading markets also cause additional price concerns.
Other ways to invest include purchasing shares of gold mining companies and exchange-traded commodities (ETCs).
Investors purchase company shares to benefit from increased gold-mining profits and use ETCs to invest in gold or other commodities and track their prices.
Combining these options gives investors an easy way to get the most out of their gold investments. Between purchasing physical gold, investing in gold mining company stocks or gold jewelry manufacturers, and relying on ETCs, there’s a perfect investment method for everyone.
Past Gold Investment Activity During Wartime Predicts the Future
Typical investment behavior is to invest before or during wartime or a financial downturn. Finance professions have observed this pattern over the past 12 years.
Due to this recurring history, steep price drops are inevitable after worries subside.
Based on the Vanda Thematic Positioning Indicator, worldwide gold investments show only a 2.5% chance of increasing during wartime. This is a stark contrast to many predictions.
Gold prices from the pandemic also prove this wrong, as gold reached its highest price of all time in 2020.
In 2014, investors chose gold as their primary safe-haven asset. After conflict decreased, investments dropped between 2014 and 2015. This is a decent indicator of future gold prices and investment activity as the Russian-Ukraine conflict begins again in 2022.
As inflation remains high in 2022, interest rates fall into question. If inflation continues to grow, boosting interest rates could become necessary.
Because the current global issues mirror the 2014 event closely, investors already bet on gold, but long-term, the conflicts with Russia could lead to changed sentiments.
Consider Gold For Your Safe Haven Investment Today
As new global events unfold, the price of gold is in investors’ hands. Although many people consider it unsuitable for protecting their financial security in wartime or other disasters, gold is still one of the top safe haven assets.
Despite the higher prices, bullion gold offers excellent value and more stability than gold stocks.
With its rich history dating back thousands of years, people instantly think of gold when a global financial crisis lurks around the corner. Those looking to invest in gold bullion should consider the risk factors of investing.
You can benefit from analyzing current worldwide gold prices and studying past prices.
Whether you plan to purchase gold bullion for retirement or need a backup plan for a global crisis or a severe financial crash, gold can serve as your safe haven asset.
Gold bullion is a worthwhile asset whether you’re a new investor or have years of experience. Learn about how to invest in a gold IRA, then speak to our experts about the benefits of investing in gold today.
Contact the Oxford Gold Group today at (833) 600-GOLD to learn how gold can protect your retirement savings.