Gold Returns as a Safe Haven on the Back of Trump’s Foreign “Policy”
Last year, markets were at pains to re-define the word jittery. The United Kingdom voted for Brexit despite promises of a financial apocalypse and Trump looked competitive against Hillary Clinton in the U.S. Presidential Election. Naturally, investors looked to safe havens such as gold and silver for protection. However, predictions are rarely correct; especially these days. Remain and Clinton were supposed to win. Both lost. The markets took both pretty well considering and that’s mostly because Trump has the potential to be pro-business and Brexit has its own global opportunities for those who love free trade and globalization. However, there are always geopolitical situations which can make investors shudder.
Gold Follows the Missiles Up and Down
Investors and business leaders have liked the Trump Presidency so far, however, no market likes uncertainty except for a safe haven. This was demonstrated in the first week of April in the lead-up to the Trump-Xi summit in Florida. For four of the first five sessions, gold rose in value. It then jumped on Thursday as Trump fired missiles at an airbase in Syria. Gold rose 0.4% in value within hours but the price dropped off on the back of conciliatory noises from China over rust belt jobs in states such as Michigan. A deterioration in relations with Russia, however, has caused gold to continue rising to a five-month high in subsequent days.
However, before investing in gold or silver, it is worth knowing the intricacies of both. Firstly, gold experts such as Lear Capital have made it plain that there is a massive difference between investing in physical metals such as gold or silver coins and gold bullion, and investing in precious metal stocks such as AUX for gold. In 1987, for example, the Dow fell 41% in one month and gold stock fell even further, by 46%. However, on the flip side, physical gold value rose 18% as investors moved into safe havens. The time to invest in a safe haven is when markets are strong, then it is a matter of waiting until a geopolitical or economic crisis presents itself and the value rises again.
Long-Term Prospects Put Gold Center
Currently, with concern over Syria, a decline in US-Russian relations, arguments with China over its policies in East Asia, and North Korea’s missile testing, and Brexit, markets are going to remain jittery for a while. This means that gold and silver are likely to remain higher and may continue to grow over the medium to long-term if the world remains unstable. The Yen is likely to stop being a safe haven currency if matters explode in East Asia and Trump is as tough on China and North Korea as his rhetoric suggests.