I recently read ‘Is the U.S. Dollar Losing Its Safe-Haven Status’ - reading time 2 minutes - thinking time much longer. This article has caused me to re-visit my constant self-debate as to whether physical gold is the best available ‘safe-haven’.

While the article is short, it quotes directly from a research note from the Bank Credit Analyst (‘BCA’ – a well-regarded research house). According to the above article, the note says:

• “Since the bursting of the tech bubble in early 2000, the dollar has been inversely correlated with risky assets. However, the recent weakness in the dollar is at odds with the historical relationship”; and,

• that in times of financial stress three important reasons the U.S.$ strengthens are (1) global capital ‘flocks’ to the safety of U.S. treasuries, (2) U.S. investors stop sending savings abroad, and repatriate capital, and (3) the U.S. trade deficit narrows during recession.

The article further reports the BCA as saying “This time around, however, the safe-haven factors have not turned in favor of the dollar thus far, even though it is premature to make definitive conclusions due to data lags. U.S. macro policies are the obvious reasons for the dollar’s diminishing role as a refuge: fiscal policy is a mess and the Fed is committed to devaluing the dollar”.

So where does that leave me on the U.S.$ and physical gold?

I have believed for some time that to suggest U.S. Treasuries are other than - at best - a very short term ‘safe haven’ makes no sense, if it can be said ever to make sense in the current economic environment. That the U.S.$ is a ‘safe haven’ is, of course, a common mantra of many financial markets advisors, conventional media writers and commentators, and Internet writers and commentators.

As for physical gold, I have believed for some time that physical gold is the best save haven against both fiat currency erosion (read in particular U.S.$ erosion), inflation, and deflation. This where ‘safe haven’ is defined not to be referenced to gold’s price at a point in time, but rather is referenced to gold’s purchasing power over time. Until I convince myself otherwise, or someone else convinces me, I continue to think physical gold currently is the best ‘safe haven’ as I have defined that term.

Something for you to think about, and then reach your own updated conclusions with the help of your investment advisors.
About Ian R. Campbell

Ian R. Campbell, FCA, FCBV, is a recognized Canadian business valuation authority who shares his perspective about the economy, mining and the oil & gas industry on each trading day. Ian is also the founder of Stock Research Portal, which provides stock market data, analysis and research on over 1,600 Mining and Oil & Gas Companies listed on the Toronto and Venture Exchanges. Ian can be contacted at icampbell@srddi.com

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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