Any major global crisis effect investment, either directly or indirectly. Markets are so intertwined in the modern world of financial trading that many investors in Europe may not even be aware their money is invested in funds held in Ukraine or Russia. If they are investors will be losing on their equities.
In times of geo-political turmoil, commodities such as coffee, oil and gold perform better, particularly the yellow metal which is used to hedge against riskier bets. The mounting escalations in the Crimean Peninsula however threatens to rebound further with the risk of a wider military conflict which would undermine equities and boost precious metals.
The general rule is gold and silver prices rise in times of economic crises and fall in times of prosperity. The banking collapse in 2008 saw the value of gold hit all-time highs, but were predicted to fall in 2014 as a result of the global economy strengthening.
Gold in 2014
Disappointing economic data coming from the United States, the world[s largest economy, has meant that investor sentiment has stayed with the safe-haven of gold. Concerns that the global economy is not growing as strongly as predicted has seen gold rally this year.
The US Fed’s decision to continue the tapering of their stimulus program persuaded traders to push prices beyond $1330 in February, and the yellow metal even made it to $1350.
Gold is predicted to average $1220 per ounce in 2014, and last week’s job data in the US showed promising signs the global economy is on the road to recovery. Ordinarily the price of precious metals would fall quite sharply in the next couple of months – but the Ukraine crisis could influence investors to stick with gold.
The Ukraine effect
Ever since protestors gathered in Kiev to protest Russia’s influence in the Ukraine, shares in Eastern Europe have suffered a 10 per cent slide, whereas gold has risen by 0.53 per cent according to JP Morgan. Investment bank analysts have taken advantage of the crisis and looked to make short-term gains.
The risk of investing in precious metals short-term however, is that prices could suddenly drop. When positive US job data was released on Friday gold prices plummeted almost $20 within the hour. But for the Ukraine crisis precious metals may have fallen even.
As it stands it remains to be seen what will happen with gold prices. If the next couple of months continues to yield positive signs that the global economy is recovering as strongly as anticipated the value of precious metals will fall and investors can look forward to making some excellent long-term profits.
Political influences however leave a dark cloud of equities and increases the risk of investing in equities. Safe-haven funds like gold, silver and platinum will therefore have the stronger hand, but will push prices up over $1400 an ounce – a significant difference between the $1220 average investors are hoping for.
Either way, 2014 is a great time to invest in gold with a view to long-term gains. For the latest deals head over to coininvest.com and protect your financial future with bullion investments.