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Gold Is Considered A Safe-Haven But Is It Really Safe?

If you’re here, you’re likely looking for two things, in my opinion. Either you’re here to learn about gold stocks and gold or you’re here to get ideas. Well, maybe there’s a third choice which is to be entertained. But I’m not sure how entertaining metals and mining is for most. Nevertheless, the point of this article is to discuss gold as a safe-haven. But after what transpired on March 12th, are gold and gold stocks really safe? Let’s take a look at the following chart:

gold futures march 12 2020

For the last 4 sessions, gold futures have pulled back as low as $1,560.40; a drop of about 8.5%. S&P Futures, however, has pulled back nearly double that at around -16% during the same period. The same holds true for the performance of the SPDR S&P 500 ETF (SPY) which slid 10% since the open on March 9th. But as you’ll notice, there’s a dramatic difference in trend between these charts is noticeable:

S&P Futures March 2020

As you’ll notice, despite the small “bump in the road” for gold at the end of February, the shiny metal hasn’t wavered in its path (until this week). That same trend holds true for gold ETFs like the SPDR Gold (GLD) as well. But as more selling pressure mounted in the broader stock market, we started to see gold decline. Why?

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This week was an incredibly panic-ridden week for investors. As such, the likelihood of a shift from stocks to cash was evident with panic selling dropping the market to levels not seen since the beginning of last year. Before that, these levels weren’t seen since the summer of 2017.

Gold Flexes On Equities

The evidence of gold’s safe-haven attributes is quite clear in my opinion. While the broader market toppled, investors sought out places for cash. Obviously, one of the best-performing sectors compared to the broader markets was gold. It did its job as a store of wealth in the most obvious way with this week becoming a clear example of why it’s been called one of the best safe-havens.

Ryan Giannotto, director of research at GraniteShares (GraniteShares Gold TrustBAR), told MarketWatch:

“The market is simply in turmoil right now. Even with today’s losses, it should not be overlooked that gold is up $40 [an ounce] year-to-date versus the 22% year-to-date loss in equities.”

Where do you stand on gold right now? Are you fleeing everything entirely to get into cash? Similarly, are you using a gold position to hedge against the market downturn and staying invested? For now, many investors who’ve “been through this before” are hanging on for the ride in light of current market swings. Gold futures finished out the March 12th session as $1,575.90, which is just shy the lows booked in late February the last time gold dipped. Are we due for a bounce?


Midam Ventures, LLC | (305) 390-2368 | 1501 Venera Ave, Coral Gables, FL 33146 | news@goldstocks.com
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