Is Gold the Ultimate Safe Haven Asset?

The price of gold has surged following increased tensions in the middle east, sending investors rushing to safe haven stocks. These are the highest levels we have seen since 2013 amid heightened US-Iran tensions

Gold, the US dollar, government bonds and cash are all often seen as safe havens for investors in times of economic stress and market turmoil. Such safe haven assets are used by investors to limit their exposure during times of instability. If you are able to identify which assets are likely to appreciate, whilst others decline, you can prepare yourself for market movements explains James Turner, Director at Company Formation Specialists, Turner Little.

Market downturns are inevitable, as such, safe haven investments offer protection from market downswings. There are a number of investment securities that are considered safe havens, but gold for years has been considered a store of value. As a physical commodity, it cannot be printed, and its value is not impacted by the interest rate decisions made by a government. Gold has historically maintained its value over time, and so serves as a form of insurance against adverse economic events.

Gold is still sought after by central banks. A study from the World Gold Council showed that central bank demand for gold rose 74% on the year in 2018, in response to geopolitical factors and the changing macro-economic environment.

A survey of 22 central banks by the World Gold Council’s data showed 18% of the central banks plan to increase their gold holdings by 2020.

This brings us to the question – is gold the ultimate safe haven asset? It is a traditional safe haven asset and will remain so, we should also be looking at new asset classes that are seeing their own boom as a result of the uncertainty. Cryptocurrency Bitcoin has seen its value surge 21% since last Friday, and the jump in its value has reignited a debate about whether it could potentially replace gold as the first haven asset class that investors consider during periods of uncertainty.

If you’re interested in talking about protecting your safe haven assets and your investment portfolio, do get in touch. We specialise in creating bespoke solutions for individuals and businesses of all sizes. The knowledge and expertise of our specialists will be able to assist with any enquires, no matter how complex.