In the aftermath of a terrorist event, stock markets tend to suffer greatly – but gold is a civilized society’s hedge against uncertainty.
From San Bernardino to Brussels, Belgium; Orlando, Florida to Nice, France, the list of confirmed terrorism-related attacks seems to span across the globe and weave through various social strata and cultures. But one thing is certain, the recent epidemic of lost lives and fearful citizens is gripping the world and creating subtle panic among those not used to seeing violence in their own backyards. Whether you analyze the market after the attacks on September 11th or crunch the numbers post-Paris bombings in September 2016, one parallel is apparent – the equities markets tank after a terrorism-related event. Sometimes for a day or two, sometimes for a month – but the results are often financially catastrophic for investors heavily biased towards stocks.
Gold emerged as the safe haven commodity for smart investors after recent terrorist attacks, and was the hedge investors needed to balance their overall risk. Let’s look at some recent examples.
What happened to the market after September 11th?
In the seven days between September 10th and September 17th, the Dow Jones Industrial Average (DJIA) dropped from 9,605 to 8,755 – representing approximately $1.4 trillion in valuation losses over the weeks’ time. Obviously, the loss of life is the bigger story here, but there is no way to ignore the financial ramifications of a terrorist attack on the domestic and global equities markets. Conversely, the price of gold was just $285 an ounce on September 10th, 2001, and it has subsequently grown to over $1,220/ounce as of Q2 of 2017 or more than four times the valuation increase. The DJIA grew from 9,605 points to about 21,000 as of the same time period – or only a little more than a doubling in value.
How else have terrorists affected equities pricing?
Terrorists understand that attacking certain targets can cause serious financial upheavals – oftentimes more damaging in the long run than attacking what would be more typical targets, like schools and tourist areas. A 2013 study by the University of Maryland uncovered that 600 of the 2600 total terror attacks committed in 2013 targeted the oil and gas industry. When this happens, the price of oil can skyrocket – thereby making gasoline more expensive, discouraging people from driving as much and/or buying new cars, and creating havoc for the automotive industry. The net result is diminished auto industry stock prices and investment losses for anyone tied to the industry.
Why is gold a safe bet in light of rising terrorist activities?
Here’s a scary number – in 2016 alone, 1,441 documented terrorist attacks occurred worldwide, claiming 14,356 fatalities. That represents about four attacks per day, with more than 1,000 people killed each month. Considering the world we live in and looking at gold’s historic position as a hedge against global uncertainty, it only makes sense to invest in a physical commodity that has intrinsic value.
Our markets may be teetering on the verge of recession (some argue large-scale depression), and governments don’t have the ability to bail out the financial sector like they’ve done in the past. This points to gold’s powerful position as the intelligent choice for today’s smart investor. For more information about gold investing and how you can balance your own portfolio with precious metals, contact American Bullion today.
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.