Buy gold as insurance against Kim’s ‘gift giving’
Yesterday North Korea sent the US a ‘package of gifts’ for Independence Day.
Unsurprisingly the successfully tested and launched intercontinental ballistic missile (ICBM) was not well received. US Secretary of State Rex Tillerson called the move a “new escalation of the threat” to the U.S. and its allies and that “global action is required to stop a global threat.”
As the US and South Korea began military exercises in response to North Korea’s gift giving ceremony, safe haven assets rose and gold made a small rebound in the face of these escalating geopolitical concerns. Gold tends to rise on various uncertainties – whether financial, economic or geopolitical.
UBS Group AG’s wealth management unit picked up on this and said such uncertainties made a case to buy gold for its insurance qualities as reported by Bloomberg and others.
UBS Group’s comments will not come as a surprise to those who buy gold bullion as they believe in gold for it’s insurance and safe haven qualities. This ‘gut instinct’ and the lessons of history have recently been bolstered by much independent academic research (see below).
Research by academics and independent asset allocation experts alike is increasingly showing gold’s insurance and safe haven qualities. In this increasingly uncertain world, these qualities are more important than ever.
Gold is insurance against heightened uncertainty – not just US risks
It is often said that the first rule to investing is preservation of capital. For hundreds of years gold has been the insurance of choice which aids with regard this important first rule.
Anecdotal and academic research into asset allocations with gold provides evidence of the metal working to hedge investment risk and to protect capital. For example, 2010 research carried out by Dr Brian Lucey and Dr Baur found “gold is a hedge against stocks on average and a safe haven in extreme stock market conditions.”
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