Rising geopolitical tensions and gold’s role as a safe haven asset
Palestine culminated into a war. Prices disregarded the robust US economic release boosting bets of higher-for-longer interest rates which end up lifting the US currency and bond yields.
Geopolitical tensions often have a significant impact on the performance of gold.
The yellow metal is considered a safe-haven asset, meaning that investors tend to folk to it in times of uncertainty, instability, and geopolitical crisis. There are several reasons why geopolitical tensions can affect the price and performance of gold.
When geopolitical tensions rise, investors become more risk averse.
They fear that conflicts could negatively impact financial markets and economies across the globe. As a result, they seek refuge in assets like gold, which are historically perceived as safe investments.
Conflicts or wars between countries can lead to currency devaluation or depreciation.
Investors may turn to gold as a hedge against these currency fluctuations, as gold is not tied to any specific currency and retains its intrinsic value.
Gold is a highly liquid asset, which means it can be easily bought and sold, even in times of crisis. This liquidity makes it an attractive option for investors looking to move their funds quickly in volatile markets.
Geopolitical conflicts can disrupt supply chains and create economic uncertainty, potentially leading to inflation.
