Read the Beforeitsnews.com story here. Advertise at Before It's News here.

By Daily Wealth
Contributor profile | More stories

Story Views
Now:
Last hour:
Last 24 hours:
Total:

Here's Why the Conventional Wisdom on Gold Is Right

Wednesday, March 15, 2017 4:34

% of readers think this story is Fact. Add your two cents.

In the world of investing, many ideas are so widely accepted that they go unquestioned. But conventional thinking is often wrong.

Here’s one piece of conventional investing wisdom we often hear: In times of panic, gold is a safe haven. Gold in your portfolio can help insure against losses when the stock market falls.

As it turns out, this piece of conventional wisdom is correct.

A recent study proved it…

Two researchers in Ireland recently wrote a paper entitled “Reassessing the Role of Precious Metals as Safe Havens – What Colour Is Your Haven and Why?” They concluded that relative to many other assets, in many countries, precious metals act as safe havens in turbulent markets.

This is because gold marches to the beat of its own drum… especially during times of stress…

The researchers confirmed that gold is uncorrelated with most other financial assets. When two assets have a positive correlation (approaching a value of 1), their prices tend to move in the same direction. When assets have a negative correlation (approaching negative 1), they tend to move in opposite directions. A correlation close to zero means two assets move independently.

As you can see in the chart below, gold’s correlation with other assets is very low. That’s exactly why gold works so well in a portfolio when markets are weak…

This paper confirms decades of academic research that gold and other precious metals are uncorrelated, both during normal times and during times of economic stress. Gold is a hedge – its price doesn’t usually follow other assets during normal times. It is also a safe haven – during abnormal times, when the prices of other assets crash, precious metals prices tend to rise.

The researchers studied different kinds of economic and market events that cause precious metals to become safe havens. They identified three general types of market-stress indicators: financial market stress, political stress, and consumer sentiment.

They found that political and policy risk is “a positive and robust determinant across countries when precious metals are safe havens against stock and bond markets tail events.”

In other words, precious metals tend to rise the most – offering the strongest safe-haven protection – during market distress triggered by government policy uncertainty.

To see the value that gold holds during economic earthquakes, consider the 2007-2008 global financial crisis…

From June 2007, when the crisis first broke, to the March 2009 bottom, many global stock markets went down more than 50%. And the S&P 500 dropped 55%.

However, during that period, the price of gold rose from about $670 to $938, for a gain of about 40%. You can see this from the chart below…

Why aren’t, say, oil or wheat considered safe-haven assets?

The main reason is that physical gold has been used as a currency for thousands of years – whereas paper, or “fiat money,” is a historically recent experiment. In 1971, the U.S. abandoned the gold standard – and was the last country to do so. Since then, all global currencies are backed by nothing more than faith in the government that prints the money.

Thus, when uncertainty about global economic policy rises and faith in government falls, gold – as the unofficial world currency – rises. Contrary to paper currencies, gold is a tangible asset which cannot be printed or destroyed. To quote another piece of (true) conventional wisdom, gold is a “currency of last resort.”

Fear among investors is nearing all-time lows, according to the Volatility Index. This is in sharp contrast to rising uncertainty related to economic policy in the world.

Now is a good time to purchase some gold insurance for your portfolio.

Good investing,

Kim Iskyan

Editor’s note: When trouble strikes the markets, owning gold can be the one thing that saves your wealth from outright disaster. Kim recently published a free special report that covers everything you need to know about the precious metal… including the three best ways to own gold today. Get the report right here.

Source: http://www.stansberryresearch.com/dailywealth/3492/here-s-why-the-conventional-wisdom-on-gold-is-right

Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!

Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST

Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser! Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover - Reduces Smart Meter radiation by 96%! (See Video).

Comments

Online:
Visits:	1,603,888,823
Stories:	8,151,670