South Africa has undergone the most dire of all weeks, at least so since the inception of our young democracy; and the Rand, as was expected, soon followed suit. However, its depreciation cannot be attributed to South Africa’s political turmoil alone, as the stronger dollar also played a significant role. Still, there is a Silver lining, in that the Rand has somewhat recovered, grovelling within the aftermath of a burning State. From an investment perspective, it is important to remember the age-old connection which exists between Gold and political unrest: Buying the former, in the rise of the latter, remains the best of all ideas…
As the US continues to rebuild its post-Covid economy, its inflation has reached unexpected heights. Fortunately, the US Federal Reserve (central banking system) believes these spikes in inflation to be only temporary. Therefore, higher interest rates are not being implemented as yet. However, to say that a firm eye is being kept on it, would be an understatement at best. From a Gold buyer’s perspective, it is important to note that a strong correlation exists between US interest rates and the price of Gold. Should the aforesaid interest rates rise, one can undoubtedly expect the price of Gold to fall. Perhaps not too overly dramatic so, but still enough to resist the heights longed for by a passionate investor. It is therefore expected that the price of Gold will continue to tread waters, whilst the threat of rising US interests rates exists.
In conclusion, despite various uncertainties and unrests within both the US and RSA economies, Gold remains a safe haven for investors. For it offers insurance against potential market collapses and can, within a South African context, protect its holders against potential Rand depreciation. So, the greater the turmoil, the greater the idea of investing in Gold.
