New Geopolitical Threats for 2022: Is Gold in Danger?

As in previous years, geopolitical tensions are likely to affect the markets in 2022. According to investment expert Arkadiusz Sieroń, gold as a “safe haven” will probably not be neglected. The investment expert’s assessment of the effects of geopolitical developments on markets and gold prices, in his own words. cryptocoin.com We have prepared for our readers.

US military intervention could further boost gold prices

Are we experiencing deja vu? I only live one. As you probably remember, January 2020 was a time of vibrant geopolitical risks, such as the US-Iran conflict and the North Korean issue. United Nations Secretary-General Antonio Guterres described these tensions as the highest since 2017. Now, here we are again in 2022 – with major geopolitical threats ahead.

Everyone knows that tensions between Russia and Ukraine have increased. The former country has amassed more than 100,000 troops and military equipment near the border by December 2021, representing the highest mobilization of forces since the annexation of Crimea in 2014. In response, NATO sent ships and warplanes to Eastern Europe and put forces on hold.

The Russian invasion and the risk of military confrontation (which could trigger a US and NATO response) worried investors, which likely spurred some safe-haven demand for gold.

However, yellow metal support can be short-lived. As the chart below shows, gold rose in February-March 2014, when the annexation of Crimea took place. Its rise began in early February (other factors were involved at the time), long before the Crimean crisis, and quickly ended in mid-March. Gold has returned to its long-term bearish trend.

Of course, this time may be different, especially since the West seems more ready to help Ukraine than in 2014. But close economic ties between Germany and Russia make union difficult, and I suspect the West will not fight to the last drop of blood for Ukraine (especially given that the country isn’t even in NATO). The fact that some countries have already started to evacuate their embassies in Kiev, the capital of Ukraine, tells us something.

However, although I would not buy gold solely because of the risk of conflict, the marginally higher risk of US military intervention could further support gold prices.

Pacific crisis could temporarily boost gold prices

The second major conflict blazing in the background is the risk of a potential Chinese invasion of Taiwan. Tensions between China and the island escalated last year, and some experts say it’s only a matter of time before the “One China” policy is implemented militarily. Taiwan has always been a nuisance to China, but the country was too weak to do anything about it. However, China’s military power has expanded radically in recent years.

Such a conflict could temporarily boost gold prices, especially as Taiwan has a military alliance with the United States and the Pacific crisis could aggravate supply chain disruptions.

Another potential bullish factor may be the lack of any recent record of Chinese military actions, and hence greater uncertainty compared to the long history of Russia’s military operations and former America’s conflicts with the Soviet Union.

It would be wise to make some preparations for worst-case scenarios.

Third, there could be a significant cyberattack. I know, it almost sounds cliché because everyone points to that risk. However, according to many experts, this is one of the biggest threats after the pandemic. This year, we saw a cyberattack on Ukrainian government websites, as well as a cyber incident affecting the Canadian foreign ministry. Let’s not forget Kazakhstan, where the government shut down the nationwide internet in response to internal turmoil last month.

The latest incident is an example of digital authoritarianism rather than a cyberattack, but the result is the same: digital paralysis with huge implications for people’s daily lives. Indeed, guess what happens when people don’t have access to the internet. Yes, they can’t check social media for the latest memes with funny puppies, but that’s not the biggest issue (really!). One of the most sinister consequences is that people do not have access to digital bank accounts, that is, most of their money today, which is usually in electronic form.

That’s why it’s wise to make some preparations for worst-case scenarios and always have some cash on hand. Maybe some gold bullion, but I suspect it would be easier to buy food with fiat currencies! This is also why cryptocurrencies will probably never replace gold. In our highly digital world, it’s good to hold on to something tangible.

Yellow metal works well in times of high uncertainty

Of course, geopolitical threats are more. I didn’t mention Iran’s nuclear advances, North Korea’s stretching of military power, the more lethal, deadly and vaccine-resistant mutation of the coronavirus, the US midterm election, environmental risks. One thing is certain: geopolitical tensions have intensified lately.

As a safe-haven asset, the yellow metal tends to thrive during periods of high uncertainty.

However, geopolitical events often trigger short-term reactions in the precious metal markets, especially if they do not directly threaten the US and its economy. This is because all tensions eventually ease and after all conflict there is some kind of reconciliation. When that happens, a sigh of relief and a correction are made to the optimistic safe-haven prices, including gold.

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