Gold and the dollar: Why are they considered safe havens during times of crisis and war?

In times of war and major geopolitical crises, the rules of the game in global financial markets change drastically. Instead of seeking high returns and taking risks in stock markets, cryptocurrencies, or startups, investors are driven by a "financial survival" instinct. This phenomenon, which economists call the "economy of fear," pushes enormous amounts of capital toward two primary safe havens: gold and the US dollar .

The fall of certainty and the shift in the investment compass

With the outbreak of any major military conflict, "certainty" in global markets plummets to its lowest point. Investors find themselves facing existential questions about their portfolios: Will the conflict escalate? Will global supply chains be disrupted? Will the currencies of the countries involved collapse? In these critical moments, fear from a mere psychological emotion into a decisive economic driver, shaping trillions of dollars. The top priority becomes preserving asset value rather than growing it, leading to widespread selling of risky assets and a flight to safe havens.

Gold: The historical safe haven that never lets its owners down

Historically, gold has maintained its position as the most important store of value throughout the ages. Unlike paper currencies, whose value can collapse due to hyperinflation or the collapse of political systems, gold possesses intrinsic value that is not dependent on the pledges of any government. Historical data indicates that gold prices have experienced significant increases during major crises, such as the Great Depression of the 1970s, the 2008 global financial crisis, and more recently, during geopolitical tensions in Europe and the Middle East.

Gold is considered an excellent hedge against inflation and currency fluctuations, with central banks and individuals alike turning to it to diversify reserves and mitigate risk. It is the only asset that carries no counterparty risk, making it the undisputed king in times of uncertainty.

Why the US dollar despite the debt?

Some might ask: Why is the world turning to the US dollar despite economic challenges? The answer lies in the structure of the global financial system. The dollar reigns supreme in global reserves, and strategic commodities like oil, gas, and even gold are priced in it. When markets are volatile, investors seek high liquidity and relative stability, which is precisely what US Treasury bonds, considered among the safest assets in the world, provide.

Increased demand for the dollar during times of war usually leads to a rise in its value against other currencies, putting significant pressure on emerging economies that rely on imports or have dollar-denominated debt.

Expected economic impact: locally and globally

The flight of capital into gold and the dollar creates widespread economic repercussions:

• Globally: The rise of the dollar weakens other major currencies such as the euro and the yen, disrupting international trade and increasing the cost of sovereign debt.
• On emerging markets: These markets are suffering from the outflow of hot capital (Capital Flight) returning to the "safe haven" of the United States, forcing local central banks to raise interest rates to protect their currencies, which could lead to an economic recession.
• For the average consumer: The rise in gold and the dollar is usually reflected in the form of inflationary waves, as the prices of imported goods and energy rise, directly affecting the purchasing power of citizens.

In conclusion, the rule of the "fear economy" remains constant: when the drums of war beat, the voice of risk falls silent, and the voice of gold and the dollar rises as guardians of value in a turbulent world.