Understanding The Current Investment Reality

Gold has been misunderstood and ignored by retail investors, financial advisors and pension managers as a critical portfolio asset during normal market conditions. However, during periods of market stress, such as we are experiencing now, gold becomes a safe haven asset that will mitigate losses in the portfolio. For a number of years, many experts have been warning about overinflated markets that were just waiting for a spark to ignite the entire system. 

I warned investors that we were in a triple bubble in stocks, bonds and real estate that was created by central bank policies. Although I concluded that a market crash was inevitable, I didn’t foresee that the spark to ignite all three bubbles would be the Coronavirus. While the virus itself is life-threatening and will result in large demographic changes across the globe, the economic implications may be worse than the disease. Major economies in Europe, Canada, and the United States have been shut down. Every industry—airlines, hotels, manufacturing, entertainment, sports, schools and retail—is in lockdown. Most of the western world is ravaged by fear, isolation, loss of employment, loss of income and the psychological effect of this massive lockdown situation. Employees have either been terminated or laid off indefinitely. The scale of this unemployment crunch and financial crisis is beyond the reach of governments’ assistance. Many businesses will not be able to reopen once the health issues have been controlled.

When the health crisis subsides, the economic effects will last for years; we may, in fact, never recover.

While there is a great deal of uncertainty because of the Coronavirus, there are two things that we know for sure. Many industry sectors have no revenue, and governments will print enormous amounts of money in an attempt to mitigate the financial crisis. Most companies with no earnings will see enormous declines in share prices. Bonds, particularly corporate bonds, will default and become worthless. Even real estate is likely to suffer dramatic declines as both commercial and residential tenants are likely to default on rent payments. This, in turn, will result in mortgage defaults at every level, and properties will be sold at fire-sale prices. These conditions create a perfect storm for an increasing gold price.

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Here are some educational resources to help you start on your gold journey, the  more

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