Death Of ‘Safe Haven’ Gold Greatly Exaggerated

Friday, September 26, 2014
By Paul Martin

GoldCore
GoldSeek.com
Friday, 26 September 2014

With escalating conflict in the Middle East, an unresolved conflict in the Ukraine, and various other geo-political risks on the horizon such as the contagion risk of Ebola, it would be expected that the longstanding ‘safe haven’ qualities of gold would come into play as they have done in the past.

In September 2008, during the financial crisis, the gold price rose $50 in one day, September 18, as investors sought refuge in the one asset that they perceived to be a safe-haven of high liquidity and high credit quality. This one day move in September 2008 was the largest one day move since February 1980.

Back in late 1979 and early 1980, some of the key drivers that propelled the gold price higher were the Russian invasion of Afghanistan and the Iranian hostage crisis.

Just looking back at old newspaper gold market commentaries in 1979 and 1980 will highlight that a lot of the key drivers for the rise in the gold price at that time were geo-politically related.

Today, the world appears to be as uncertain if not more uncertain. Indeed, in 1980 there was little risk of terrorism – state sponsored or otherwise.

In the late 1970s and early 1980s, the gold futures markets did not have nearly as large an impact on the world gold price as they does now, and the gold price was primarily driven by physical demand for gold, a lot of which was Middle Eastern and Asian demand.

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