Over the last year, I've seen nearly a dozen investment writers explain that gold "no longer" acts like a safe-haven asset because it often takes dives and doesn't pop whenever bad economic news is apparent. Plenty of those articles have been here at Seeking Alpha.
It's important to understand that gold (GLD) still is a safe-haven asset, and nothing has changed in the last year, which is possibly a reason this billionaire bought 400% more gold.
What is a Safe-Haven Asset?
A safe-haven asset is a boring asset that investors flock to out of fear of losses. This doesn't mean all the assets behave identically -- not even close. Some are short-term safe havens and others are long-term safe havens.
The only extremely short-term safe-haven asset for times not including hyperinflation is cash and near-cash assets like t-bills. That's it. Dividend stocks, land, real estate, gold, silver, copper -- those other assets aren't extremely short-term safe havens.
This hasn't changed. It's the same now as it was in the 1970s, 80s, 90s, and the 00s. Nothing has changed. This long-term aspect of gold is one reason I've repeatedly said I plan on buying more even if the price drops or rises -- either way, the long-term prospects are still what I'm looking for.
Why Gold's Safe-Have Status Matters
There are progressively becoming fewer and fewer safe-haven assets as plenty of investments become almost certain investment losses and plenty of even short-term safe haven investments are becoming less desireable.
The IMF recently reported the following:
"In the future, there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets."
This means the premium of owning an asset that's safe will be increasing -- especially if we begin to run into the fiscal brickwall that our national debt continues to create. Note that this isn't just for physical bullion, but also for ETFs like GLD, IAU, and SGOL.
It's important to understand that gold is always a long-term play -- it's an insurance policy, if you will. And no, insurance policies don't usually make a lot of money right at first. The same with gold.
We know gold is a great inflation hedge -- but it's also a great long-term safe haven, and that will become increasingly evident over the next few decades, especially for the dollar-cost averaging investor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: I own physical gold bullion and will likely be buying more in the near future.
