Gold… The currency of a time, a metal, commodity that was used as jewelery by people in every part of history, stored and accumulated… Today, it is a place where investors take shelter for various reasons such as economic crisis, uncertainty and turmoil in financial markets, and fear. safe harbor. It is a hope of wealth, which is seen as an investment tool that never loses, especially in the eyes of the Turkish people, is attached to people who get married as an old tradition even at weddings, and can cause people to search for treasure in historical novels and old stories…
When we look at every corner of history, we see that gold has found a use for itself. It was used together with silver as a medium of exchange for a long time, and with the emergence of paper money, this practice, which was determined as the equivalent of the printed money in terms of creating a standard, continued until the end of the First World War, and it is nice that even states see gold as a safe haven. is a proof.
So what about gold a safe harbor is it? Does it always earn its investors? In other words, to ask again, doesn’t gold hurt?
First of all, let’s investigate in which situations gold becomes the focus for investment.
Gold, which is called the “safe haven”, is a popular investment tool especially when the climate of fear is high, a depression is felt in the financial markets, a disruption in the economy is a matter of time and uncertainty is high. This is where the name “safe harbor” derives from. It is also possible to see this more clearly when we take a brief look at the graphics and history.
The graphic above shows the movement of gold during the times of the “Public Debt Crisis” in Europe after the 2008 Economic Crisis or the “Great Recession”. The debt crisis, which took place after the economic crisis and plunged Europe into another great depression, had created an atmosphere of uncertainty and fear in the markets at that time. Investors, on the other hand, found the solution to protect themselves from this uncertainty in the “gold” investment.
This chart shows the course of gold in another crisis. With the effect of the economic uncertainty created by the COVID-19, which emerged at the end of 2019 in the beginning of 2020 and whose effect was felt devastatingly until the middle of last year, gold managed to see its historical peak in the middle of 2020 from its low levels in 2017.
The reason why investors turned to gold in this period was that there would be a deterioration in the economies, which was considered to be certain, and there would be high decreases in the profits of the companies. The decisions taken within the scope of the COVID-19 measures, along with the measures that had a negative impact on demand, such as the curfew, also led to a series of measures that would disrupt production activities and negatively affect the supply chain for a long time. In the light of all this, the value of gold increased rapidly in dollar terms.
We are living in the last crisis and uncertainty environment today. Rapidly increasing interest rates, the economic deterioration of the COVID-19 measures, the US debt ceiling crisis, and on top of all these, the bankruptcy of a number of banks in the USA, in Switzerland, the giant Credit Suisse was only taken out of bankruptcy by its rival UBS. These were all developments that reminded investors of the safe-haven feature of gold. As a matter of fact, with the effect of these events, gold reached its historical peak again…
Years of damage: It’s not always possible to win!
So what happens when this crisis environment ends, uncertainties disappear and the economic outlook recovers? It is possible to answer this question by extending our graph of the 2011 crisis.
A loss of 9 years for someone who invests in gold from the peak point! This is exactly the answer.
An investment transaction made from the points where gold is close to the peak may cause an investor to make a loss from 2011 to August 2020. Imagine, you are waiting for a crisis to rise again for the “safe haven” where you have been evaluating your savings for 9 years…
So is it a lie that gold is a “safe haven”? Actually, this isn’t exactly a lie. Just a misunderstood investment behavior by markets and investors.
Gold is a “safe” haven because it is more likely to perform well in crisis environments where economic uncertainty is high. This feature makes it an indispensable investment tool for ‘crisis’ times. However, this does not mean that gold will make steady gains and rise forever. In short, safe harbor is far from an endless increase in value and gain. As can be seen in the chart, some investments may remain in loss for more than 9 years.
The underrated point in gold investment: Return on alternative investment
If we look at it from another perspective, we can see that gold has always followed an upward movement in history. However, this does not show us that gold is a safe and profitable investment tool for every period. The main reason for this is the return on the “alternative investment”. In other words, despite the amount of money invested in gold, the same amount of money can be valued more in another investment tool within 3 years. In other words, if a person who thinks that gold will rise even higher in 2011 and that there is no end to this crisis environment and buys gold from a place close to the peak and waits at a loss until August 2020, if he invested in any European or Asian stock market in the same period, he would have made more profit. Or even if he did not take this risk and deposited his money in the bank with a small interest rate, it would have caused him to earn a higher profit. Moreover, this would most likely present a real profit to the investor.