Thursday, August 29, 2013

The Situation in Syria and Gold Prices

One of the main factors in determining the price of gold is global stability. In times of peace and prosperity people invest in stocks. However, in times of war and global uncertainty people look for safe investments. Precious metals, gold in particular, are considered the safest of investments. The current rise in gold prices correlates with the rising tension in Syria.

War Is Bad For The Stock Market

War is bad for business. There are exceptions, but the majority of global corporations suffer when there is armed conflict. Investors react to war by placing their money into bonds, oil futures, and precious metals. These are traditionally considered the safest places for holding money.

One of the hardest hits areas is going to be the emerging markets sector. Investors will not want to have their money in funds that have a substantial holding in any of the countries likely to be involved in the conflict.

Unfortunately there are many countries besides Syria that are going to be involved. These areas include the entire Middle East, as well as Russia, Pakistan as well as potentially India. Not only will investors not purchase stock in funds that do business in these areas, they will also likely look to exit the market as soon as possible. That could very well lead to a runoff panic and a market free-fall.

This article from TheIndependent discusses the recent events and their ramifications on global gold prices.

The stock markets in Saudi Arabia are already seeing dramatic losses. Saudi Arabia is considered to be a barometer for the entire Middle East. The financial markets of Kuwait have also seen sharp downturns, all on the impending violence.

Is the Situation in Syria Likely to get Worse

Most of the talking heads think it will. Russia has already entered into the fray. John Kerry has come out and spoken about the use of chemical weapons. Statements from the United States, Great Britain and Australia have made it clear that this will not be tolerated and there will be a response. Russia, meanwhile, has said that they believe there should be no response.

Warplanes have already been moved into strategic spots in the region. This article from TheGuardian describes the United Nations activities in and around Cyprus. This would be a launching pad for the attack.

Is it Too Late to Invest in Gold?

No. Not only is it not too late, it is the perfect time. Gold prices rise on the speculation of war, and they don’t tend to drastically fall if the war doesn’t come. The tension in the area is enough to cause economic instability for quite some time. This has repercussions that will last far beyond the conflict.

Gold is a fantastic investment for the long term. The current crisis should be a reminder of why gold is such an important part of any portfolio. You cannot predict the future state of global affairs. Every week there seems to be a new flare up in some part of the world. Any one of these can completely cripple a sector of the stock market. This is why responsible investors always allocate a portion of their investments for gold. 

Now is the Time for a Gold IRA Rollover                      

If you don’t have any gold in your retirement portfolio, then now is a great opportunity to rollover your IRA to gold. There are many IRA custodians out there that specialize in Gold IRA rollovers. Call a few of them to determine which one works best for you. Gold prices have been low for the last two years. What we are seeing now is a return to the steady upward climb that gold was on since 2005. Now is a great time to load up on more gold before the price skyrockets.