2016 has gotten off to a rocky start.
Global equity markets are on shaky ground, triggered by chaos and huge declines in the Chinese markets.
The “war factor” is hitting the red zone, with ongoing conflicts in Syria and Iraq, and some nasty and potentially very dangerous posturing between Iran and Saudi Arabia.
Not to mention concerns about claims by North Korea that it has successfully tested a hydrogen bomb. And then there is the issue of China “building” islands in the South China Sea.
No surprise then that early January saw a steady increase in the price of gold.
Historically gold will rise in price when investors get twitchy about both market volatility and geopolitical conflict and uncertainty.
Gold is a universal currency that knows no borders or boundaries. It offers a haven of relative stability during times when investors just aren’t sure where else to put their money.
It’s uncertainty that keeps investors awake at night and thinking about gold.
When investors know in advance that something bad is likely to happen, they factor that event into their calculations. The markets adjust in advance of the bad news
But when investors are taken by surprise, then you get the big swings.
And at times like now, when investors have a nasty feeling they are going to be hit by a few surprises, they play it safe and put some of their cash into gold.
The big question for 2016 is… How many big surprises are coming our way? How many events are going to jump out at us and take us unprepared?
What does Vladimir Putin have in store for us in 2016?
What will happen to the markets in China?
How is it going to play out between Saudi Arabia and Iran?
Not to mention oil prices, commodity prices, emerging market struggles with a strong US dollar…and so on.
It’s little wonder the price of gold is inching its way up.
But be careful what you wish for.
Most people buy gold as insurance, not as a way to make big bucks. Gold is a safe haven.
So if the price of gold goes to the moon, that means a lot of other things will have gone seriously wrong with the world.
For peace of mind, hope for a gradual and measured increase in gold prices this year. It’ll likely happen, just because everyone feels so jittery about so many things out there right now.
Just no moon shots please.
I don’t want to trade an increase in gold prices for major hits on my other investments and assets.
About the author: DH Kenrick is a student of world economics and a committed gold enthusiast. Follow me on Google+
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