Currently, in the news we are all hearing lots about financial cycles and that we are in one of the longest in history. With that being true, it only makes sense that it will end and it will be sooner rather than later. So if we are approaching a market correction and economic slow down or worse, what is an investor to do?
I am betting on Gold
For me, it only makes sense that because this financial cycle was one of the longest that when it comes to an end, it will be messy. Some people have known nothing but an economy and stock market that goes up, and those same people and investors have only know credit and debt that is basically free with near to zero interest rates. When things turn these people will be so caught off guard that they will naturally panic just adding to the downturn and chaos. It is for these reasons that I am betting that people will flock to gold as a financial safe haven, and we will see the gold price rise.
Gold The Safe Haven Asset
When things in the financial world get confusing and uncertain people flock to safe haven assets that hold their value and can preserve their wealth. The most recognizable safe haven in a financial sense is and always has been gold. The influx of people rushing to gold will, in my opinion, push the price up dramatically, much as we witness in the financial crash of 2008. During the financial crisis of 2008, we witness gold price rise to a peak in 2011 of $1,895 per oz
Why Is Gold A Safe Haven Asset?
This is a hard question to answer, but for me it is a branding play if you will. Think about it, everyone knows what gold is, and it is considered valuable to everyone in every corner of the world. It is the most recognizable brand in the world in a way. If you had to associate something with money that anyone in any place or culture would recognize as money it would be gold. So if stock or currencies lose value and people lose faith or trust in these things, where are they going to go? Simple to the one thing they know that is worth alot of money and that is gold! Gold has been used as a form of currency or money since approximately 650 BC. It is ingrained in every culture around the world that gold is wealth, and because of this I feel it will be once again the default currency when the stock market and western currencies take a hit in the next financial correction.
What is Gold Worth?
Gold is hard to put a value on as it does not have many metrics that we can use to value it. We do not have earning or other reports to use to determine it intrisic value, like we do with stocks. So how do you determine its value or a real gold price? Well the simple answer is we take an educated guess. Some will try and determine how much gold stores there are and how much mining production there is etc, but gold is a rather secretive investment. Think of how many people might be buying gold and keeping it in their home or in their bank, how do you account for this supply etc. For me I look at if the current price is good value based on historical average and then decide do I think it is going to go up or down in price.
Is Gold Going Up Or Down In Price?
In the short term who knows! It will probably go down and up etc. Now in the long term I strongly believe that the gold price is going much higher. I feel that we will see gold multiply in price much like what it did during the financial crisis of 2008. Gold is just too cheap on a historical basis and there is just too much debt in the financial system currently that something has to give in terms of currencies around the world and peoples faith in their governments and their respective financial systems. I feel that people will lose faith in their governments and their respective currencies and when this happens people will rush back to the one assest that always has and always will represent wealth and money and that is Gold!
This is not financial advice and all financial investments carry risks. Investors should seek financial advice from professionals before making any investment. I wrote this article myself and it expresses my opinions.