Should you buy gold bullion in times of crisis?
In 1974, Richard Nixon who was president of the U.S at the time, ended the 42 year restriction placed on ordinary citizens buying bullion. At that time the price of gold was $150/oz.
In 1980, Russia invaded Afghanistan. This act laid the foundation for Islamic extremism in the region. That invasion pushed the price of gold to $800/oz.
In 1986, the U.S imposed sanctions on South Africa which was the largest gold producing country at the time.
From 1992, the price of gold plummeted to $225/oz. The bull market that began in that year was slow to pick up momentum until the Y2K doomsdayers had the world believing the world was coming to an end. When 2000 rolled by without any catastrophes, IT shares crashed as the massive sitcom bubble burst and the price of gold rallied.
Then 2001 came along and Al Qaeda launched its attack on the US on September 11 causing world markets to go on lockdown. Gold prices went up and gained more impetus during the Iraqi war that ensued.
Markets later started to pick up and a bull run picked up pace only to come to a screeching halt in 2007 with the crash of the housing bubble. This sparked the great recession in 2008 which affected not just the U.S alone but the entire world. The price of gold then was $1,150/oz.
Throughout the global turmoil, market crashes and general economic uncertainty gold has remained the most steady asset class. It is a safe asset to invest in and a lucrative one to hold on to. If you bought gold in the 80s, you will find that its value has more than tripled in today’s economy and is likely to keep going up in the near future. Just this month, we have seen the price of crude oil plunging to zero because of the effects of the Corona virus pandemic on global economies. Gold has surpassed the $1,800 mark. Stocks and other asset classes will continue to drop as long as countries remain on lockdown to curb the spread of COVID-19. There have been a lot of epidemics in the past like SARS, MERS and Ebola but none of them have gripped the entire globe as the novel COVID-19 has. This crisis showed the world how ill-prepared we are to deal with catastrophes that could threaten our very own existence as the human race.
The question is when should we buy bullion?
When prices go up of when they go down?
When the world is imploding?
When there is a threat of war, actual war or in times of peace?
When currencies plunge and become worthless?
When mornachs die?
When there is global chaos or general global calm?
Gold as an asset class defies logic. It does not behave like other asset classes so there are many different answers to those questions. Right now the price of gold is rising to unprecedented highs. A clever investor will buy bullion whether times are good or bad and holds on to it for as long as possible.
