How the US government seized all citizens’ gold in 1930s – by Chris Colvin and Philip Fliers (The Conversation – May 21, 2020)

Chris Colvin is a Senior Lecturer in Economics, Queen’s University Belfast and Philip Fliers is a Lecturer in Finance, Queen’s University Belfast.

With global financial markets in disarray, many investors are turning to classic safe havens. Gold is trading above US$1,750 (£1,429) per troy ounce, which is the standard measure – more than 15% above where it started 2020.

Even after a strong rally since March, the S&P 500 stock market index is down nearly 10% over the same period.

Gold confers familiarity during downturns. Its returns are uncorrelated with assets like stocks, so it tends to hold its value when they fall. It is also a good way of avoiding currency devaluation.

It therefore features in any well diversified investor’s portfolio, whether via gold-mining shares, gold funds, bullion or whatever.

Yet there are two slight caveats to viewing gold as a safe haven. Early in an economic downturn, gold prices often plummet with the rest of the market. This is from investors selling gold to offset losses in shares and other assets.

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