Gold Not a Safe Haven? Tell That to the Folk in Ukraine, South America, Middle East and Africa
14 August 2014
Geopolitical risk continues to support gold at these levels. Macroeconomic risk was shown in the poor European growth data with the German and French economies still having severe difficulties.
Germany’s economy shrank in the second quarter and France again failed to conjure up any growth, snuffing out any signs of a recovery in the euro zone which is now also weighed down by tit-for-tat sanctions with Russia.
Europe’s largest economy contracted by 0.2% on the quarter, undercutting Bundesbank forecasts that it would stagnate, with foreign trade and investment notable weak spots. With so much uncertainty surrounding Russia and Ukraine, a quick rebound is unlikely.
With ECB monetary policy already ultra-loose, the data is very worrying. It could mean the ECB will become more aggressive in money printing with a consequent impact on the euro.
It is important to remember that while gold and silver prices have been in lockdown and only eked out small gains so far in 2014 despite increasing risk – especially geopolitical, gold has seen very strong gains in many non-major currencies.
This is especially the case in Ukraine where the currency has lost more than half of its value versus gold. Gold in Ukraine Hrvynia up 70% since the start of 2014. People who own gold in Ukraine would laugh at you, if you said that gold is not a safe haven.
People in Iraq, Iran, Syria, Gaza and elsewhere in the Middle East would also attest to how gold is a safe haven – both for refugees fleeing with portable wealth that is gold and for those who stay in country but see their currency devalued. As would people in Argentina (see chart below) and throughout South America and indeed Africa.