The World Has Become A More Dangerous Place: Gold Is A Safe Haven

05/09/2014

The World Has Become A More Dangerous Place: Gold Is A Safe Haven

The world is more dangerous now than it was a few years ago, according to a new survey from Pew Research Center and USA Today. The survey revealed that 65% of those polled believe the world is more dangerous than several years ago, 7% feel the world has gotten safer, and 27% believe things haven’t changed much.

Take a look at global news headlines and it is not hard to understand the findings of this survey.

A quick look at cnn.com world news reveals the following headlines:

  • Ukraine accuses Russia of attacking airfield
  • UK PM David Cameron to address lawmakers on terror threat level
  • Britain raises terror threat level
  • US military carries out airstrikes against ISIS near besieged town

Meanwhile, BBC news world headlines offer up more information:

  • Ukraine troops abandon key airport
  • Nato to assemble “readiness force”
  • Sense of fear in Mariupol
  • Iraqi forces break siege of Amerili
  • Fresh clashes erupt in Syrian Golan
  • Senegal confirms first Ebola case

The Pew Research Center also noted that perceptions of the United States as a global power have plunged near a four-decade low. The study showed that 48% believe the U.S. is a less important and powerful world leader that it was 10 years ago.

As global political, military instability continues to increase —that in turn can have economic implications. Throughout history, gold has been considered a safe-haven investment and store of value that is essentially driven by the free market and can’t be influenced by monetary policies of a government.

Gold is considered to be the world’s first and most longest lasting currency. Historical lore says that gold was first used as money and a form of transactional payment in 3000 BC under the direction of the Pharaohs of Egypt. A gold/silver ratio was determined pegging the worth of gold equal to two and one/half parts of silver, according to the code of Menes, the founder of the first Egyptian dynasty. The first gold coins were minted in the kingdom of Lydia in Asia Minor around 610 BC.

Current day gold demand generally revolves around four key categories including:

  • jewelry,
  • industrial demand,
  • investment demand and
  • central bank purchases.

Safe-haven or diversification demand would fall into the investment demand category.

In an uncertain world, there will be a segment of investors who always gravitate toward gold.
The months and years ahead show potential for increased global instability. The major industrialized economies continue to show structural deficits, with entitlement issues likely to bog down spending and growth in the years ahead. For example, in general, the older industrialized world maintain the majority of global political power at major international bodies like the United Nations and the IMF, while the rising emerging markets, especially China, have the economic power. The international political structures in the world have not adjusted to reflect the changing and current economic reality.

As the Pew Research Center survey revealed, the world is perhaps becoming a more dangerous place. And, given gold’s historical role as a safe-haven it remains a key portfolio diversifier.

Kira Brecht is managing editor at TraderPlanet.