Gold – The Superior Safe Haven

As war raged between Israel and the Palestinian terrorist organization Hamas, and threatened to expand across the Middle East, gold was the only traditional safe haven asset that surged in price, proving, yet again, its superiority in times of extreme global stress.

Gold was priced at $1,845 the ounce in New York on Friday, October 6, the day before Hamas’ brutal assault that killed more than 1,300 Israeli civilians. Following the attack, gold began its ascent, climbing to more than $150 the ounce in the first two weeks of the war.

Meanwhile, U.S. Treasury bonds and the U.S. dollar failed to provide safe haven protection to investors.  Treasury bonds, backed by the full faith and credit of the U.S. government, are reputed to be the safest investment on the planet. But in the face of the geopolitical tension, and a domestic political crisis that had the House of Representatives paralyzed, unable to take any action because the majority Republican party could not agree on a Speaker of the House, Treasury bond prices tumbled. Yields on the 10-year Treasury note, which move inversely to price, climbed to 5 percent, a significant move from 4.8 percent just prior to the outbreak of war.

With U.S. Treasury bond prices falling, the U.S. dollar, also a traditional global safe haven, failed to gain any increase in value during the first two weeks of the war.

For millennia, gold has been the world’s safe haven store of value. Unlike other traditional havens, it carries absolutely no credit risk and has a negative correlation with risk assets like stocks and bonds.