When it comes to a financial crisis, investors will want to have gold on their side based on data from yesteryear.
“During major financial crises in history, gold has vastly outperformed paper assets,” wrote Stefan Gleason of Money Metals Exchange.
From a micro perspective, investors only have to look at the height of the ongoing pandemic in 2020. As the major stock market indexes were selling off, a sustained flight into safe haven assets saw gold rise almost 70%.
In the current market landscape, a number of analysts are eyeing inflation as the next major market disruption. Talks of stagflation, high interest rates, and low economic growth, could provide the perfect backdrop for investors to start adding gold.
Should the markets get shaken up again, gold can offer an ideal respite from equities exposure.
“Given the tremendous inflation pressures currently exerting themselves in the economy, the late 1970s may be the best model for what to expect going forward,” Gleason noted. “It would mean rising price levels combined with a weak economy (stagflation). And given that our debt load today is more than four times greater as a share of the economy than it was in the 1970s, investors should brace for the potential of a far greater financial crisis.”
Getting Easy Gold Exposure
Getting gold exposure doesn’t have to be a trying task with ETFs like the Sprott Physical Gold Trust (PHYS). PHYS gives investors easy access to gold exposure with the option to convert their ownership shares to physical gold.
PHYS invests and holds substantially all of its assets in physical gold bullion. PHYS seeks to provide a secure, convenient, and exchange-traded investment alternative for investors who want to hold physical gold without the inconvenience that is typical of a direct investment in physical gold bullion.
“The Trusts’ precious metals are fully allocated which provides the Trusts with direct beneficial ownership,” Sprott mentioned on its website. “Unlike other bullion funds, the Trusts do not have an unallocated account that is used to facilitate transfers of bullion between financial institutions that act as authorized participants. Without exception, all of the bullion owned by the Trusts is held in the Trusts’ allocated accounts in physical form.”
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