In times of plenty and stability, people usually experiment with everything, including finances. It makes sense, as prosperity offers a safety net upon which the investor can land if it all goes belly up.
Meanwhile, in times of uncertainty, strife, and crises, the paradigm shifts, and people get more conservative. They turn towards safer bets like gold to retain as much of their money’s value as possible. Gold investment strategies are increasingly popular.
The central thesis is that demand for precious metals is climbing because of the recent geopolitical, logistical, and environmental crises that the world faces.
How Did We Get Here?
For complex global problems, there are no simple answers. The issues are often multi-faceted.
First, we have a problem baked into the system, namely the global supply chain. Systems can either be resilient or they can be efficient. These two values are often antagonistic, as one climbs, one goes down.
The current global supply chain was designed to maximize profitability and efficiency. But this left it very vulnerable, as it relied on a world that effectively marched in lockstep.
Nowadays, as countries repolarize both in their politics and alliances, it becomes harder to communicate, coordinate, and trade.
The second biggest cause is the recent pandemic in the early 2020s. People were locked inside their houses, not working by fiat. As a result, many governments printed money and paid them to compensate for the lack of income.
These created trillions of extra dollars that were chasing a diminished supply of actual valuable goods. Money has become much cheaper because there’s a lot more money and fewer actual values.
Gold prices during the economic crisis climb as people rush to buy gold in order to lock in the current value of their money.
Here are the main ways that gold can benefit us in times of crisis
Gold as a Safe Haven Investment
It is known universally that old is a safe haven investment. Gold price trends during inflation and recession can skyrocket as people rush to buy gold. Even entire nations create government programs to buy and store gold, just like a squirrel gathers nuts for a rainy day.
Inflation is often known as the hidden task because even if you have a bag of undeclared money under your mattress, inflation will take away from that money, similar to a tax. And the worst part is that it doesn’t have to reduce the amount. It reduces the value of the amount that you have.
A Hedge Against Politics
Even a decade ago, the world was pushing hard for globalization. The trend was to reduce trade barriers, tariffs, and any other impediments to trade and cooperation. Nowadays, since 2022, the world is splitting into political blocks, accounts are seized, goods are tariffed more, and some trade routes (which were often the shortest) are no longer safe.
Corporations and capital holders are running away from certain countries for some of these reasons. And it doesn’t have to be a catastrophe that chases them out. Sometimes, as is the case with the EU, it is way too overregulated, leading to a more suffocating business environment.
Regardless of the reason, some entities shift away from stock and bonds to more reliable and tangible ways to keep value.
Diversifying Financial Portfolios
Let’s say that you own a store, and you stock your store via truck delivery. You invest 98% of your profits in merchandise, have it all loaded into one truck, and wait for the goods to arrive.
What happens if the truck falls off a steep ravine or gets robbed? Of course, your entire investment will be lost.
Now, let’s say that the same store needs resupply, but you don’t bring it all over in a single truck, but have it spread out in 5 trucks. Then, even if one of them goes missing, you will not be completely devastated.
Well, the same principle applies to financial portfolios.
Even if you think you are rolling high, you should not have all of your money in one place. For example, what if you spent everything in the service industry, and then lockdowns came? Of course, it would have proven disastrous.
Do not irrationally invest in diverse areas for the sake of diversity but also stay away from tunnel vision. In this regard, gold really helps.
Many people invest immediately either in top gold IRAs or buying physical gold bars. Gold has proven to be stable, and it has been perceived as valuable before humans had writing. It’s as close to a sure thing as you can get.
How to Invest in Gold
Buying Physical Gold
This is the most intuitive and straightforward way to invest in gold. You go to a guy who has gold, you give him money, and he gives you the gold. However, there are other factors to consider, namely storage and, if you’re buying from far away, transportation.
Most likely, you will also have to invest in a safe as well.
In addition, many companies that sell gold do not deal in small amounts. So, there is pressure to buy quite a lot at first. Or there are offers to send monthly payments until you reach the value of bullion, and then they send it over.
Regardless, buying actual gold seems to have a higher-than-average buy-in upfront cost. But once you have it, you don’t have to feed it, and it never spoils. Technically, you can leave it for your great-great-grandchildren.
Keep in mind that this isn’t a great way to get rich, as you are buying gold at an all-time high when its value is maximized during inflation. When things get stable again, the price will drop, so reselling it may not be a good ROI.
You should buy gold to basically freeze money for rainy days.
Gold ETFs
Gold Exchange-Traded Funds allow you to invest in gold like you would in any other stock. It gives you access to the value of gold during crises but without worry of storing and protecting precious metals on your property.
Every smart investor has at least a bit of money put away in ETFs.
The downside is that you have to enter an entire financial ecosystem of management companies, government regulations, extra fees, and so on.
Unlike buying real gold, you aren’t investing in ETFs to free money but to make a profit if you play your cards right. The keyword here is liquidity.
Gold Mining Stocks
If gold prices rise, and you want to get in on the action, you don’t necessarily have to invest directly in gold. You can invest in the companies that mine the gold.
The upside is that you are riding the same economic wave, but the downside is that there are more externalities and variables that can affect success.
Conclusion
There used to be a saying: “Buy land because they’re not making any more of it.”
Even though gold is not as limited as land, the supply is pretty small, in contrast with the demand. There’s never enough to cause inflation. To this, we add the fact that it never degrades or goes bad, and it has an immeasurable impact on human history, culture, and religion.
Gold prices during the economic crisis always climb. People buy gold to hedge against inflation, war, political expulsions, and so on.
