Experts explain why gold is a ‘safe haven’ during global conflict

Financial markets have become unstable following escalating geopolitical tensions, including conflict between Israel and Iran, and the hostilities between Russia and Ukraine; gold has proven itself to be a hedge against inflation and a safe haven during times of uncertainty

Rick Kanda, Managing Director at The Gold Bullion Company, has explained why gold is viewed as a safe-haven asset and revealed what to look out for when investing in gold bullion.

Why is gold a ‘safe haven’ asset?

“Gold is a proven hedge against inflation, preserving the value of assets when other prices rise. This is because, unlike other currencies whose value can diminish as central banks print more fiat money, gold’s worth remains resilient. Gold has a low correlation with other assets, so it offers diversification benefits when the value of traditional investments fluctuates. This can help reduce the effect of uncertainty on your investment portfolio.

“Throughout history, gold has withstood crises and geopolitical events. During the COVID-19 pandemic, gold’s value surged as stock markets plummeted. Investors recognised gold’s ability to retain value and sought protection in the timeless asset.”

How does global conflict affect gold prices?

“When there are wars or high political tensions, gold’s value usually increases. This is due to a combination of economic uncertainty, market fear and safe-haven demand.

“Because gold is seen as a safe haven, investors will often buy gold in anticipation of a broader economic fallout. As demand increases, so does the price of gold, making it one of the most stable assets to invest in during uncertain times.”

Should you invest in gold during times of global tensions?

“Over the past two years, global geopolitical tensions and trade uncertainty have put the price of gold in a strong position. Gold prices rose to a weekly high of $3413.80 per ounce in connection with America’s strikes on Tehran on 21st June. Many people see this as confirmation that gold prices can continue to rise in the current geopolitical and economic climate.”

“However, gold investment should not be dependent on whether the market is either surging or falling; you should be more focused on whether your financial situation enables you to do so at that particular time. Gold should always be seen as a long-term investment strategy. The time is right if you have the funds, you are in a financially stable position, and you’re looking for an investment that will store value long-term without thought towards any short-term price fluctuations.”

Are gold prices expected to rise?

“Gold prices have surged to record highs this year, with factors such as the weakening of the US dollar, rising inflation rates and market volatility contributing to the rising costs.

“It is important to keep an eye on these factors when investing in gold, as they can provide insight into gold’s performance”

“Gold should not be looked at as an asset you react to impulsively. Remember that gold is a long-term investment, not a short-term trade, and market fluctuations are a natural part of the cycle, not a reason to panic. If you have invested in gold for the right reasons, which are long-term financial storage, short-term declines in the market should not hurt your confidence.”

For more information, visit https://www.thegoldbullion.co.uk/