This week intelligence officials intercepted a credible Islamist-linked terror threat to the UK and mainland Europe. The style of attacks would have been similar to the co-ordinated multi-hit attack on Mumbai where 170 people died two years ago. Indeed the Eiffel Tower has been evacuated twice in the past fortnight due to terror threats.
This news serves as a timely reminder that we live in turbulent political times. As well as the fear this strikes to personal safety it also has a major influence on the investment community. It would only take one successful attack of this magnitude, whether it be from Islamic terrorists or indeed from North Korea’s nuclear threat, to send the already fragile markets into a tailspin.
Anyone with investments in many of the traditional assets such as equities,
bonds or even property would no doubt suffer huge loses as the markets respond to a major terror attack. Recovery in such a weak economic global economy would prove slow at best.
With a terror threat still very real, the case for owning physical gold in your portfolio is dramatically strengthened. As the ultimate safe haven asset gold provides the essential portfolio insurance against such market events. When terror triggers equities to drop in value investors flock to safety, pushing the gold price upwards.
So many investors think of the gold price rising in economic downturns but forget how well it also performs during geo-political unrest. Most significantly it is the terror threat which is most unpredictable and can catch investors unawares. By owning gold in its physical form (through gold coins or bars) the investor has no counterparty risk whatsoever so owns the ultimate security.
While few people would consider not having house or car insurance, few of us have in place ‘portfolio insurance’, leaving themselves vulnerable to unexpected market downturns. This latest ‘near miss’ acts as a timely reminder to act now and move some liquid assets into physical gold before it is too late. Remember the old adage, ‘You don’t wait to buy gold, you buy gold and wait’.
Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.