The stock market is trying to ignore the increased levels and locations of global tensions, but without much success. The scenario highlights the long-standing attraction of investors to gold and other precious metals during times of increasing inflation and particularly during times presenting an unclear or uncertain economic horizon. Though the 50 year mark for the end of the gold standard is heading our way, gold remains the only true non-fiat currency universally accepted. It has and continues to serve as a stabilizing force for many currencies throughout the world. One of the biggest changes during that span of time is market transparency. Central banks used to be very secretive about their metal holdings and now the information is regularly used as an economic barometer and released on a monthly basis by a majority of countries.
Political and economic uncertainty in Europe, political and economic uncertainty between the U.S. and China, and the new U.S. intervention in Syria has combined to create a thick layer of investor concern and uncertainty. The alliance forming between Iran, Russia and Syria is serving as another source of concern for investors and today’s announcement by Kim Jung-un, that he’s prepared to go nuclear with any provocation pushed gold to a 5-month high. Gold began the year at $1,151.85 and closed out the day up more than 9½% for the year. Meanwhile silver, which has been struggling with the $18 ceiling, had no problem running through it today and maintaining solid gains through the close.
The stock market and U.S. dollar index closed lower, while metals and oil closed substantially higher. And even though Syria is not a serious player in the global oil market, like many of its neighboring countries, any type of uncertainty in the Middle East contributes to an increase in oil prices. More than 4.5 million refugees have fled Syria since the beginning of the civil war, most of them women and children. Jordan, Lebanon and Turkey have absorbed the brunt of the exodus, while the roughly 10% making their way to Europe are being accused of sowing political divisions and not being met with open arms in most cases.
The safe-haven attributes of gold are catching the eye of many investors and the nervous legs of a long-in-the-tooth bull market, may very well be in the crosshairs of a growing group of would-be terrorists, intent on facilitating a market panic, thereby adding yet another domino to the already precarious and unstable political and economic global environments. Today’s “mother of all bombs” dropped by U.S. aircraft on Islamic State fighters in Afghanistan, continues to fortify the nervous trend and the market responded with a resounding thud. Nevertheless, stock market values still near the high and gold prices 30% below the previous high are making physical gold ownership an important and growing consideration.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.