It’s an open secret that the world has become an increasingly unpredictable place. As we roll towards the end of 2020’s first quarter, we’ve already seen threats of a third world war, the prospect of a global recession and an extremely dangerous new strain of flu.
Through all of this, investors have been sent scrambling for cover as they rush to hedge against any potential losses amidst the uncertainty.
For years precious metals such as gold, silver and platinum have been regarded as an excellent store of value and during times of economic uncertainty, investors would flock to stock up on precious metals as a means of hedging their risk.
Alongside this, cryptocurrencies have also been seen by some as a potential safe haven investment. On paper, it would appear that crypto enthusiasts do indeed have a point.
Unlike fiat currencies, cryptocurrencies are not issued by governments or financial institutions. Their unregulated nature means that in theory, they are unaffected by geopolitical instability or government intervention.
This had made cryptocurrencies extremely popular with people who desire privacy or those operating on the fringes of legality. In recent times, cryptocurrencies like Bitcoin in particular have exploded onto the mainstream with institutional investors taking an interest in this new “digital gold”.
Despite the bullish outlook for Bitcoin and other cryptocurrencies, prices have taken a hit in the wake of several global crises, a situation that has led many to question the veracity of cryptocurrencies as a safe haven investment.
With investors dropping cryptos like hotcakes as they turn to more tried and tested investments, the question remains, is there really such a thing as a safe haven investment?
In this article, we take a look at the pros and cons of various safe haven investments and whether you should invest in them.
1. Precious metals
Tangible, valuable and a great store of value; these are the characteristics of precious metals that make them a safe-haven investment.
When you look at it, fiat currencies are essentially just pieces of colored paper with numbers printed on them. What makes it special is that its value is guaranteed by the government that has issued it.
However, what do you do when said government collapses?
In the aftermath of crippling reparations forced upon them by the victorious Allies, The Wall Street Crash of 1932 and widespread unemployment, Germany’s Weimar Republic went under.
Within just days, hyperinflation took hold and the Reichsmark lost all of its value thus rendering it no better than a piece of paper.
In stark contrast, precious metals can be used for a variety of purposes and possess numerous desirable characteristics that allow them to appreciate in value. Thus, if you’re looking to hedge the value of your money, there’s no better choice than precious metals.
While gold may demand an exorbitant price, there are dozens of other choices on the market. Take platinum for example, often called “white gold”, platinum is a great alternative to gold. More affordable and with platinum price predictions on Currency.com looking good, there can be no better time to invest.
On the downside, precious metals can be difficult to transport and liquidate. You’ll typically need to work with dealers or buyers and arrange for the actual transfer of the asset.
2. The US Dollar
With China and its neighbors reeling from the effects of the COVID-19 virus, investors have begun flocking back to the US Dollar.
Like any other fiat currency, the U.S Dollar is driven by factors such as economic outlook, government stability and demand.
Being the largest economy in the world with a highly-developed government, the United States and the Dollar have long been widely regarded as the bedrock of the global economy.
Now with the prospect of a global recession, a broken-up European Union and a global pandemic, it should come as no surprise that investors are feeling antsy. As can be seen by current market sentiment, 2020 would be an excellent time to snap up some US Dollars.
3. Mining stocks
While mining may not exactly be the most environmentally friendly of industries, mining stocks are likely to be a safe haven investment in 2020. An increased demand for precious metals likely means an increase in revenue for mining corporations.
This likely means that mining shares and precious metal ETFs will also appreciate in value. Hence allowing you to both hedge your risk exposure whilst at the same time turning a nice profit.
However, investing in shares is not for everyone. You should ideally park your cash in a diversified portfolio instead of speculating on share prices.
With uncertain times ahead of us, investors are likely to take a more cautious approach as they look to protect their investments. The only way to do so is by careful research and plenty of planning.
This is a press release. Trustnodes has not undertaken any verification of any of the above statements and any statement or project contained therein is not necessarily endorsed by Trustnodes. Readers are strongly urged to do your own research.