For decades, financial advisors have recommended gold, silver, and other precious metals as a way to diversify client portfolios. Because these metals are considered non-correlated assets, they tend to retain value during periods of economic turmoil. When traditional assets like stocks and bonds suffer, certain non-correlated assets may actually gain value. To financial analysts, this is a powerful motivator. Economic uncertainty makes gold and silver products seem more attractive, as the value of a precious metal isn’t pegged directly to traditional financial indicators.
However, not all experts agree on gold’s place as a reliable safe haven asset. Economist Virginie Courdet lays out her argument in a landmark study, Gold and financial assets: Are there any safe havens in bear markets? She concludes that gold functions as a “weak hedge” during short-term bear markets and financial recessions. She also finds that long-term bear markets often see gold as a strong safe haven “for the United States” and a weaker safe haven for other large nations.
Conflicting opinions by economists calls into question the wisdom that gold is a safe bet during financially unstable times. The explosive growth of the globalized economy has changed the way experts view the concept of a bear market, and this evolving ecosystem calls for reappraisals of existing financial advice.
Hero Bullion founder Jake Haugen offered his thoughts on the role gold should play in diversifying investor assets during troubling economic times. “I’m always a bit reluctant when I hear bullion dealers claim that gold is a sort of perfect safe haven investment,” says Haugen, who has worked in the precious metals industry for over fifteen years.
Haugen isn’t entirely counting gold and silver out as a historically sound safe haven asset. He explains, “when traditional markets flounder, gold’s price either stays the same or appreciates.” According to him, this is the “definition of a safe haven asset.”
His opinion echoes the views of other prominent investment experts. Warren Buffet has been generally cautious of claims that gold is an infallible safe haven asset, but contended in one public statement that it has a “way of going long on fear.” This certainly mirrors gold’s historical price trends; the precious metal’s value spikes considerably during global catastrophe or economic recession.
Ultimately, experts like Haugen default to historical evidence to back their opinions on gold’s role in the modern investment portfolio. As he explains, “nothing is set in stone,” and gold might not “always be the best way to hedge against inflation.”
Still, he concludes that “there’s quite a bit of historical evidence to support the claim that gold, and all precious metals, remain a viable safe haven asset.”
As world conflicts and the looming threat of a U.S. recession undermine public confidence in the global economy, a growing number of investors are turning to gold bars and coins to safeguard their investment portfolios against rapid inflation and uncertainty.
While the jury is still out on gold and its place as the world’s best safe haven asset, leading experts like Jake Haugen remain bullish on bullion.
Disclaimer: This content does not necessarily represent the views of IWB.