Gold has been seen as a safe haven investment by many people for years and with good reason. The yellow Precious metal does not lose its value in ties of crises or when currencies get weaker. It does, the opposite – it gets its strength from heightened risks and crises. This has been going on for centuries. There are more contemporary scenarios where gold picked up momentum from disastrous geopolitical scenarios like when Saigon fell to Argentina’s economic woes, Venezuela’s hyperinflation and other global crisis. Gold also shown brightly during the recessions and more recently, the financial economic meltdown of 2008. Crisis situations can come in many form but you can always trust it to bail you out when you are in a financial pinch. You can sell to gold buyers to get the cash you need when you need it.
History is full of stories and examples of how gold has helped governments and ordinary citizens in desperate economic times.
Gold bought safe passage for Vietnamese refugees
After the Vietnam War, a lot of people were driven out of the country because of a crippled economy, an uncertain government dispensation and discrimination. Most people left by sea but to procure passage from smugglers who would demand payment in gold. An adult would have to pay 10-12 taels of 24k gold (1 tael equals 1.2 troy ounce). This form of payment was acceptable because the Vietnamese currency was not worth much however, gold could be sold anywhere in the world.
Gold used to settle external debt for South Korea
South Korea found itself dragged down by the Asian financial crisis of 1997. It sank the markets, triggered a banking and a currency crisis and almost pushed the country to bankruptcy. The government turned to the International monetary Fund for a bail-out to stop the country’s economy from freefalling. South Korea, which has always been known as Asia’s economic tiger was experiencing its toughest times ever.The nation took it a step further by launching a campaign to collect gold to help pay the country’s foreign debts. For four months, South Korea managed to collect 227 tons of gold. The gold collection involved 3.5 million Korean households and raised $2.13 billion. The gold collection drive enabled the country to honor its IMF debt three years ahead of the scheduled date.
Gold keeps coming to the rescue during hyperinflation and currency devaluation in South America
Argentina, which happens to be the third largest country in South America has had its fair-share of hyperinflation, currency devaluation, and stagnation. This was not new for Argentinians who have become accustomed to living through economic crises. There was the hyperinflation of ’89, the economic crisis of 2002. Each time, the country experiences the rapid loss of confidence in its currency. For instance, in 1989 the price of consumer goods rose to 5000% and in 2001/2002 the Argentinian peso lost three-quarters of its value. However, this last one was drawn out and caused widespread panic in South American countries. Argentinians were barred from buying other currencies like the U.S dollar but instead they turned to the one commodity that any country facing the problems it faced would do – they turned towards gold. Venezuela experienced the same problem and to cope individuals flocked to gold buyers to sell their gold jewellery and other gold products to supplement what little they were earning.
The examples above illustrate how powerful gold can be in times of economic crises. Gold is a currency that is not affected by the demise of individual country’s demise. It is universally accepted and is a currency that is portable and highly liquid.