The Rise Of Gold, China, And The Economic Barbarians At The Gate

Jun. 09, 2016 2:22 PM ETIEF, SPY, GLD, IAU23 Comments
Caiman Valores profile picture
Caiman Valores


  • Gold has risen by 18% over the last six months and there are signs it will continue to rise in value and there is no clear indication as to why.
  • China's unsustainable growth and impending meltdown has the failure to derail global economic growth.
  • Growing distrust between governments and their constituents is undermining the value of fiat currencies.
  • Rising geopolitical uncertainty and economic volatility coupled with gold not being correlated to stocks and bonds makes it an appealing asset class in an uncertain world.

With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people. - FA Hayek

Gold (GLD, IAU) has long held a special place in the portfolio of many investors with the lustrous yellow metal perceived to be the best safe-haven asset and store of value in uncertain times. Recent global economic and market volatility has caused gold to spike by 18% over the last six months with signs of further appreciation on the horizon. This has triggered considerable interest in the yellow metal, which many believe is the ideal investment to offset the risks associated with fiat currencies, historically low and even negative interest rates, growing geopolitical uncertainty and economic instability.

In fact, there are signs that the greatest threats to fiat currencies, market stability, and socioeconomic cohesion have reemerged, and these have the potential to derail the fragile economic recovery in the U.S. and even cause the global economy to sink.

In the past, I have been particularly harsh on the value of gold as an asset class, with it having been one of the poorest performing and most volatile asset classes over the last 50 years. But one thing it has proven time and time again throughout history is that in times of absolute social and economic disintegration, it retains its value and provides a clear hedge against uncertainty. And this raises the question for investors everywhere, are we facing a global economic doomsday with the barbarians at the gate readying for the metaphorical sacking of Rome?

Genseric Sacking Rome

The barbarian at the gate

Globalism and the rise of global socioeconomic interdependence have created an ever more complex, interlinked, and increasingly dependent global system, where an economic tsunami can sweep through

This article was written by

Caiman Valores profile picture
Investment specialist natural resources & precious metals. Focus on geopolitical & economic risk. Emphasis on Latin America. MBL USyd MA Pol Sci UNSW.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I/we have extensive investments in physical gold bullion and antique gold coins.

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