In the last couple of days, we have witnessed a really harsh and sharp exchange of words between North Korea and the USA, more specifically President Trump. This really disturbed a lot of people, since both countries have nuclear weapons and North Korea has threatened the safety of US allies for years, and has now threatened the US territory of Guam, as well as potentially threatening mainland USA. Some people, however, are particularly unfazed by all the commotion and freely visit the island of Guam.
All of this unrest has had a predictable consequence; people are investing in non-monetary valuables, such as silver and gold. This, however, should not be such a big surprise. Geopolitics can have a big impact on the economy, which is nicely summed up in this article https://www.silverbullion.com.sg/Articles/Detail/How-Geopolitics-Could-Make-Singapore-the-Most/2041.
1. What’s Up with Gold?
Well, for a start, the price; gold rose in value as much as 2.3% to a price of almost $1300, despite the fact that typically gold prices plummet during the summer. The last time gold held this price was in November, just a day after the US election.
The election of a wild card president had led to a bit of uncertainty in the USA, weakening the dollar. This, in turn, drove the gold prices up.
2. Why Is Gold Price On the Rise Now?
The sharp rhetoric leads to tensions which are felt all over the world. In times like that Gold is what is known as a safe haven currency. It doesn’t depend on any kind of regulatory body to give it value. Instead, its value is intrinsic. However, that in itself doesn’t explain the spike in the price.
When there is a threat of war, people tend to flee from the government-issued currency and turn to things like gold. However, the allure of gold is measured to drop significantly if the war actually breaks out.
3. The USA’s Role
Every action the USA takes is closely monitored by the whole world because the US is one of the most important economies in the world. If the USA is involved in an event directly, the investors become nervous and start investing in precious metals.
This can lead to a chain reaction of people withdrawing their investments and trust, further weakening the US dollar. Ultimately, this can lead to an economic crisis. However, most people do not believe that anything will come out of this particular situation, so this course of events is highly unlikely.
4. Where Is Gold Going From Here?
Most experts agree that gold price is expected to rise until we can be sure how this situation will be resolved. In the following weeks, gold will break through the $1300 mark, with the tendency to reach as much as $1350 per ounce before the situation stabilises.
However, experts have found another interesting pattern in the gold charts. Namely, a cup and handle pattern seems to be forming in the chart. What it means is that gold will go beyond even the $1350 mark. In fact, those same experts are claiming that gold could shoot past $1400 per ounce price tag and land somewhere around $1460, which is a 14% increase from before the North Korea incident.
Whether you are affected by this crisis or not, investing in gold is a good option for people with extra disposable income.
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