With the conflict between Ukraine and Russia, the fear of a full-blown-out war is looking to be more likely than ever, and everyone in the world is starting to think twice. The Russian Rubble is now worth less than 1 U.S. cent, cryptocurrency is unsure, oil prices are on the rise, and everything else’s price is increasing with it.
Is Gold going to be the next best thing to invest in? Is it still a feasible investment? In this article, we’ll be looking at why you should or shouldn’t invest in the precious yellow metal.
The Geopolitical Tension
What does geopolitics have to do with Gold? Everything. The conflict between Ukraine and Russia has had a catastrophic effect on the global economy, and many of our amenities, resources, and prices are increasing. This is because Russia is the second-largest oil supplier in the world.
The European Union and the United States have all placed sanctions on Russia for its attack on Ukraine. These sanctions hinder trading between these nations and ultimately the rest of the world, which means that oil is now more scarce.
Oil costs more; therefore, all suppliers will have to increase their prices in order to make up for the additional expense, and all retailers will also have to increase their prices to not lose out on profit. Because oil is now more scarce, transportation of goods will also be affected. But what does this all really imply?
Historical Use Of Gold
Gold has been used a lot throughout history. And no, we don’t mean when there wasn’t any currency and people were only trading. During World War I and II, we mean when everyone, even the countries themselves, reverted to Gold as a currency.
Gold, which became the standard for currency in most countries, was a pivotal part of the war. Hitler didn’t like the idea of Gold as a currency, but he needed it to continue waging his war, so he looted a lot of countries in Europe. An estimated $600 million at the time, or billions in today’s time, was stolen from neighboring countries’ central banks and vaults.
This upset the balance of the gold economy in the world. What’s worse was that a lot of these were lost during the war, buried in places most couldn’t find. This meant that the amount of Gold in the world, specifically the mined ones, dropped significantly. Gold was now rarer but less valuable than it was in the past.
Investing In Gold Today
Today, Gold which is seen historically as a hedge against inflation, major economic disruptions, and geopolitical tension, has soared to a 16-month high of $1,970 an ounce. This is more than 7% so far in 2022. Additionally, the world’s largest Gold-backed ETF rose to 1,029.3 tonnes as of February 23, 2022, from 975 tonnes on December 31, 2021.
Support for precious metal prices is also expected to lower due to rising inflation concerns. With this being said, buying on dips is still a very safe and viable option both for long-term investment and for making up for short-term expenses.
Alternative Gold
The easiest and most efficient way to invest in Gold is now digitally. ETFs or Exchange Traded Funds based on gold or gold funds that track the underlying asset are now available for everyone.
Sovereign Gold Bonds or SGB are another way to invest digitally in Gold. Issued by the Reserve Bank of India, it’s an eight-year bond denominated in gold grams. There is an expected return of 2.5% annually alongside Gold’s market price at the time of redemption.
What did you think about the video? Are you going to invest in Gold? Is digital Gold an option for you?
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