Geopolitical Risk Highest “In Four Decades” – Gold Demand In Germany And Globally To Remain Robust

– Geopolitical risk highest “in four decades” should push gold higher – Citi
– Elections, political and macroeconomic crises and war lead to gold investment
– Political uncertainty in Germany means “gold likely to remain in good demand as a safe haven” say Commerzbank
–  “There has rarely been such political uncertainty in Germany at any time in the country’s post-war history” – Commerzbank
– Reduce counterparty risk: own safe haven allocated and segregated gold

The geopolitical case for gold investment has been emboldened due to heightened and ongoing geopolitical risk, according to Citi analysts.

In every continent, there appears to be major political upset and geopolitical risk against a background of growing economic uncertainty and turmoil. Just this week we have seen the US declare North Korea’s leader a ‘sponsor’ of terrorism, Angela Merkel seemingly lose her political dominance in Germany and the EU and the Gulf countries ramp up fear mongering regarding Iran.

What does this mean for gold? Quite simply its role as a safe haven is now at its strongest point in four decades according to Citigroup.

Commerzbank concur and this week their analysis concluded that the political uncertainty in Germany means “gold is likely to remain in good demand as a safe haven.”

“There has rarely been such political uncertainty in Germany at any time in the country’s post-war history,” according to Commerzbank. Given the fragile state of the European Union and the monetary union this does not bode well for the EU or indeed the euro.

The geopolitical case for gold investment today is not just because of current geopolitical risks including Germany, but because there is no let up on the horizon. It seems with each political, financial or humanitarian disaster more problems swiftly follow.

Investors are no longer considering the downside risks to gold investment to be as great as geopolitical and macro risks pose to risk assets such as equities and bonds.

We have seen this in recent World Gold Council figures. Demand for physical gold bars and coins climbed by 17% in the last quarter. This, say Citi, is the new normal.

“Event-driven bids for gold seem to be occurring more frequently and may be the new normal… In short, even as the rates and forex channel dominate the outlook for gold pricing, the yellow metal is increasingly being used by investors as a policy and tail risk hedge.”

What are the geopolitical risks today?

If an extra-terrestrial being was carrying out a risk-assessment on landing on earth, they would be struggling with where to start. The fact is, you can’t assess risk reasonably right now as there are so many unknowns.