The global geopolitical climate has become increasingly uncertain, with numerous instances of war and escalating tensions between nations. As a result, gold is often seen as the ultimate safe haven investment. Not only does this precious metal provide investors with a way to protect their assets from currency debasement, but its history as a store of value in times of geopolitical turmoil also makes gold a secure option.
But what does war really mean for the gold price?
The answer largely depends on the type of conflict. In general, wars that involve nations with an international presence tend to drive up gold prices, as investors seek out safe haven assets. This was certainly true of the Iraq War, which pushed gold prices to an all-time high in 2008. Conversely, civil wars and other conflicts with more local implications, such as the Arab Spring, typically have a more moderate influence on gold prices until their outcomes become more clear.
It is also worth noting that the effects of war on the gold price do not necessarily have to be negative. For example, the global realignment of assets in response to the end of the Cold War saw gold and commodities both rise sharply in value. This was largely due to the fact that the absence of a superpower provided a sense of global economic stability, which drove investment and speculation in the commodities markets.
Finally, war may also cause changes in the gold price indirectly, through its effects on other commodities such as oil and lithium. Oil prices, in particular, tend to show strong relationships to changes in the world’s geopolitical situation, as well as to the strength of US dollars. Conversely, waning demand for lithium in times of war could cause its price to dip, in turn making gold relatively cheaper and therefore more attractive to investors.
Ultimately, the effects of war on the gold price are difficult to predict. Politically motivated conflict can have far-reaching implications for both the global economy and for investors’ portfolios. Investors must, therefore, be vigilant in order to take advantage of any opportunities that arise – and prepare for any risks – during times of geopolitical uncertainty.