The last several years have seen extreme economic turbulence. From the U.S. mortgage crises of 2008 to the European Union sovereign debt issues still being dealt with today, investors all over the globe are faced with an ever-changing landscape of economic and geopolitical risks.
Central Banks Turn on the Printing Presses
Following the financial crises of 2008, global central banks turned to monetary policy in an attempt to ease economic gridlock. While the U.S. raised its key interest rate for the first time in nearly a decade back in December, it is unlikely that the Federal Reserve will raise rates again any time soon. In fact, many central banks such as the Bank of Japan and the European Central Bank are still actively engaged in quantitative easing measures and have even resorted to negative interest rates.
Whether the money printing by central banks has had any real, positive effect remains to be seen. In fact, some analysts have suggested that the massive amounts of quantitative easing and free money will one day spur massive inflationary pressures and other economic issues.
Where Can Investors Turn?
Precious metals like gold and silver have been seeing solid buying interest in recent months and appear to be at the beginning stages of a multiyear bullish run higher. These precious metals are being bought due to the many sources of uncertainty surrounding the global economy including a slowing Chinese economy, the recent Brexit referendum and more.
Gold and silver have been considered a reliable store of wealth and value for thousands of years, and are recognized and exchanged all over the world. These precious metals carry no counterparty risk and are easily exchanged.
The recent high prices in gold and silver could be indicative of more economic troubles ahead, and the threat of hyperinflation may be a legitimate concern for many investors.
Gold and silver may provide a meaningful hedge against inflation or declining currency values, and in today’s era of negative interest rates and quantitative easing, investors need to consider the potential impacts on their portfolios.
Precious metals like gold and silver may be very useful for portfolio diversification purposes as well, as they often show little to no correlation to stocks or bonds.
If you are concerned about global economic weakness, future inflation or geopolitical risks, now may be the ideal time to consider an allocation in these key precious metals.
Harald Seiz is the founder and CEO of Karatbars International GmbH and in his senior position is committed to the national and global expansion of the company. Karatbars International GmbH was founded in 2011 and is one of the leading companies in the segment of gold cards between 1 and 5 gramme gold bars. Karatbars International is therefore a global market leader and sells its products in more than 120 countries. The company’s head office and logistics centre with over 60 employees is located in Stuttgart.