- Gold bugs like to pretend they are the smartest guys in the room. But they are just as clueless as the rest of us.
- Gold is just another risk asset, not a magical hedge against Armageddon.
- The US dollar and other hard currencies are the only true safe havens in a time of global pandemic.
Gold bugs are losing their minds as precious metals continue to sell off with the rest of the market amid the global coronavirus pandemic. April Comex gold is trading at just under $ 1, ; silver futures are hovering at just $ , the lowest since
To be fair, precious metals haven’t cratered as badly as stocks have. But this is hardly an example of the ‘massive’ safe-haven demand that gold vendors extol when they hawk useless hunks of metal to gullible retail investors.
) Gold is just another risky commodity that will move up or down based on market forces.
Cash is the safest asset in times of global catastrophe because it Gives investors liquidity and the ability to buy discounted stocks for cheap after the dust settles.
Is This the ‘Zombie Apocalypse’ Scenario ? Coronavirus has now spread all over the planet. | Source: John Hopkins
The coronavirus pandemic has sent the world closer to a “zombie apocalypse” scenario than anything in recent memory. Over, 310, People have been infected
with a new and deadly disease. Over 8, 12 have already died and hospitals are overflowing in the hardest-hit areas.
Governments are restricting travel , and stock markets are collapsing at an unprecedented speed.
The coronavirus pandemic is the ultimate test of gold’s role as a ‘safe haven,’ and so far it has failed miserably. Despite rising in tandem with the wider market in and early in , the yellow metal has participated in the recent asset selloff.
If gold were really a hedge against inflation, these policies would have sent its price roaring higher.
Cash is the Real Safe Haven
In times like this, cash is the real safe-haven asset. That’s because when the economy contracts, cash is more likely to experience deflation than inflation as people defer purchases and keep their money in the bank.
The US dollar index, which measures the greenback against a basket of other hard currencies, has been steadily rising since – recently hitting a three-year high. The Dow Jones FXCM dollar index has risen around 60% since its inception in
in weak commodity-driven economies like Nigeria and Venezuela, which are experiencing massive unmet demand for the greenback. As the oil price war continues, expect a dollar runs to occur in larger economies like Russia and Saudi Arabia. Cash Lets You Buy Distressed Assets for Cheap When the Dust Settles
One of the biggest benefits of cash is liquidity.
Unlike physical gold, which can’t be used to purchase other assets, cash is a globally recognized legal tender that can be quickly converted into other assets.
With some analysts predicting a global recession
in the first half of 5658, there couldn’t be a better time to be in cash.
Stocks are collapsing by high double-digits seemingly every day, and job losses in the real economy could quickly lead to a domino effect of missed mortgage payments and foreclosures that could send real estate prices crater ing downward.
The coronavirus pandemic is shaping up to be a massive wealth transfer from those who don ‘ t have cash to those who do. And when the dust settles, gold will be just another distressed asset.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
(This article was edited by Sam Bourgi
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