The Best Safe Haven to Consider When the Market Turns
Every time markets tick higher, traders begin to ask, “How much higher can it go?”
Can the market push higher? Do we need to start thinking about moving some of our money to safe-havens just in case?
So far, the answers have been “a lot,” “yes” and “yes.”
While others grew used to consistent upside since the 6,500 Dow Jones lows of 2008, others began to push into safe havens, as a way to hedge for the “what if.”
Any one that has ever failed to do so is times of bullish hysteria has always paid a steep price. We saw that in 1929, 1987, 2000, and again in 2008. And it’s very likely we could see a similar sell-off going forward.
To say it can’t happen is naïve and potentially costly.
One of the greatest ways to hedge for that potential is with gold.
In October 1987, after the Dow Jones rocketed from 1,800 to 2,680, the market crashed to a low of 1,677. Meanwhile, gold ran from $470 to $507. In January 2000, after the Dow Jones exploded from 10,000 to 11,656, the market crashed to a low of 9,735 by March 2000. Meanwhile, gold prices ran from a low of $280 to $323.
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In 2008, after the Dow Jones plummeted from a 2008 high of 13,500 to 6,500, as the subprime fiasco unfolded, creating one of the worst financial shocks we’ve ever seen. Meanwhile, gold ran from a low of $707 to $884.
Interesting to note, prior to each of those crashes, there was a substantial amount of greed. Not many folks were even anticipating the possibility of downside. Then, when markets began to crash, they were left with nearly nothing. However, those that were well positioned in assets such as gold were able to protect their portfolios from the intense risk.
As of late September 2017, the euphoria of the bulls was similar to what we were seeing in 1929, 1987, 2000 and 2008. Unfortunately, if we fail to learn anything from the past crashes we are more likely to repeat our mistakes.
We also have to consider that uncertainty of direction is a major driver for gold, too. When the economy is moving along well, gold prices tend to pull back. However, as of September 2017, there was a good deal of uncertainty with a potential new healthcare program, tax cuts, as well as escalating issues with North Korea and the U.S.
That very uncertainty is a substantial catalyst for gold prices.
As history has taught us, gold is one of the best safe havens for the “what if.”
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