Desperate Investors Rediscover the Ultimate Safe Haven Investment
From Peter Reagan at Birch Gold Group
Recently, those of us trying to plan for a stress-free retirement are searching for a way out of the economic chaos of the last few years.
A few reasons that older Americans appear to be seeking a safe haven for their hard-earned savings include:
- Recent turmoil in the banking sector from earlier this year (the foundation of which was laid down over a decade ago)
- The Federal Reserve’s efforts to ease inflation by raising interest rates since early last year
- The Fed’s own forecast that we’ll tip into a recession this year – just three years after the pandemic panic tanked the global economy
Here’s a sample of the uncertainty investors are experiencing:
The speed at which a bank can be deemed insolvent has increased dramatically with improvements in communication and technology, which prompts businesses, institutions, and wealthy individuals to rethink ways to safely store their cash.
To be clear, this is not to sound the alarm that the collapse of the banking system is imminent. However, recent history also shows that these are different times, with different and often unknowable risks. [emphasis added]
So how exactly are people reacting to this economic uncertainty?
What safe havens are investors turning to?
There are a number of different kinds of inflation-resistant assets that people who are saving for retirement can diversify into during times of uncertainty.
As you’d expect, some tend to be more popular than others. Especially during a time when “official” inflation is 4% and the average savings account pays a yield that starts with a zero… And a series of bank collapses have, all too recently, reminded us of the reality of counterparty risk:
Counterparty risk is the probability that the other party in an investment, credit, or trading transaction may not fulfill its part of the deal and may default on the contractual obligations.
Recently, gold is regaining its rightful place in that conversation:
The share of Americans who think gold is the best long-term investment almost doubled in 2023, to 26%, according to a recent Gallup poll.
According to Gallup, gold is now the #2 “best long-term investment,” according to American investors.
Real estate remains the #1 “best long-term investment.” Keep in mind, though, that if you have a mortgage, you’re already participating in the real estate market.
Despite their popularity, your financial advisor isn’t likely to recommend gold.(or real estate either) as investible assets.
So if you also think gold is a smart long-term investment for you, you’ll have to do your own research.
Here are a few things you need to know.
Why only physical gold is the safest safe haven
The question to ponder after considering the information above is: Exactly why are older Americans considering gold as a place to put their hard-earned dollars?
According to the Gallup poll results, gold tends to be the beneficiary when confidence levels are down. This is typically during times of economic recession or uncertainty, as happened around the time of the Great Recession, and is happening again today.
Not just today, either – gold has been a good choice for most of human history:
[Gold] has been a store of value for literally thousands of years and is considered the longest-tenured store of value and exchange in the history of the world. Unlike fiat currencies, gold’s value is not set by a central banking system and for the most part is not subject to the political will of governments. Additionally, it often has been a haven for investors during times of crisis and financial instability, appreciating in value as risk increases in the financial system. [emphasis added]
But it’s 2023, not ancient Greece, and a wide variety of gold investments are available.
So what kind of gold is the better choice?
We’ve addressed this comprehensively on our “Why physical gold?” page. Here’s the short version:
- No counterparty risk
- Extremely liquid
- Low storage costs
- Low fabrication costs (especially compared to gold jewelry, which is marked up as much as 300%)
The world’s central banks think physical gold is a better choice:
By 2010 central banks had become net buyers of gold on an annual basis, as slowing sales from Western markets and increased buying from emerging markets eventually tipped the scales. Since then, central banks – particularly those in emerging markets – have added 6,815t of gold between 2010-2022 with the pace of purchasing accelerating in recent years.
Buy why? According to poll results from central bankers, the reasons they buy gold are virtually identical to the reasons everyday Americans do:
- Performance during times of crisis
- Long-term store of value/inflation hedge
- No default risk
- Effective portfolio diversifier
Are you also looking for a safe haven to ride out today’s economic uncertainty? An asset that provides diversification, inflation protection and is a reliable performer during times of economic crisis? If so, you want to make an informed choice. Knowledge is power.
You can get all the information you need about diversifying with physical precious metals for free to right here.2023, Featured, gold as investment, inflation