More and more financial experts are standing behind gold’s role in an upcoming economic turmoil. The merits and safe-haven status of the precious metal are aligning popular beliefs that it will outperform most (if not all) financial assets in the next few years.
Gold To Stand Above All
Whether or not the COVID-19 is the only reason why most financial markets are tumbling is still disputable. However, the fact is that equities, oil, and yes, the cryptocurrency market, plunged hard in the past month. Even though there are some signs of recoveries, world-renowned economists and experts are rallying up to predict that doomsday is still upon the global economy.
Amid this comes gold. With thousands of years of existence, it has earned the status of being a safe-haven during times of uncertainty. As commodity investor Jim Rogers said – “whenever people lose confidence in money and in governments, they always buy gold and silver.”
Recent history is also on its side. During the last financial crisis in 2008, the precious metal dropped initially (as it did now) when investors were panic selling their assets, but eventually surged and reached new highs.
This time, though, the role of the precious metal might be even more vital. The massive stimulus packages coming from governments are pushing gold to become a necessity, according to Roy Sebag, CEO, and founder of Goldmoney Inc.:
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“Central banks have officially lost control of their most powerful policy tools. It is against this macroeconomic sea change that gold will thrive as the money par excellence.”
Popular U.S. economist and permanent gold-bull, Peter Schiff, also agrees on the matter. Schiff, who believes that the only option for the U.S. to avoid hyperinflation is to bring back the gold standard, warned that “there is a lot more doom yet to come.”
This Time Is Different
This financial crisis might indeed be different for gold. While the housing bubble and banks, in particular, received the blame for the 2008 Great Recession, the coronavirus effects are exiting the realm of one sector or industry.
Most countries are initiating lockdowns, which hampers major business operations. Ultimately, this impedes physical gold distribution as well. The shortage of deliveries means that it can’t reach the investors. The domino effect continues, and even gold futures are feeling the adverse impact. Different exchanges are showing significant double and even triple-digit per-ounce premiums.
The Central Bank of Russia recently made an unexpected move to halt gold purchases. After years of stacking large amounts, the largest country by landmass might be selling to international investors instead as prices and the global demand have skyrocketed.
Or Maybe Digital Gold?
All of the above could raise the case for what some people call digital gold – Bitcoin. It has some resemblances to the precious metal. For instance, both are scarce and not run by a central authority.
The primary digital asset, however, is yet to prove itself during a financial crisis. It’s younger, less experienced, and still a lot more volatile. Nevertheless, it shows substantial signs of serving side-to-side with physical gold in terms of a hedge.
BTC also has some worth-pointing-out advantages on gold. It’s digital – meaning that national-wide lockdowns can’t halt its distribution.
Bitcoin is an electronic peer-to-peer cash system. The investor doesn’t have to worry about physically transporting it.
As long as one has access to the internet, he can easily send or receive funds in a matter of minutes. It could be cheap to transact as well – $633 million were recently transferred for as little as $0.26.
Or, perhaps, instead of arguing which one is better, investors could follow Robert Kiyosaki’s advice. The Rich Dad, Poor Dad author, recently urged people to avoid fiat and focus on saving both assets – gold and Bitcoin.