Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
Gold is irreplaceable, says CME Group, in light of the yellow metal’s remarkable strength. In the face of harrowing economic and geopolitical conditions, the popular precious metal has once again proven its unparalleled ability to keep pace with inflation and adapt to various macroeconomic pressures.
Gold’s Versatility is Unmatched
Gold’s unrivaled versatility has established it as “one of the oldest and most reliable assets,” according to Jin Hennig, global head of Metals at CME Group. This “chameleon” asset uniquely adapts to varying economic challenges, delivering consistent value to investors amid volatile and unpredictable shifts.
Elise Backman, a commodity investor at Wellington Management, highlights that the severity and pace of these changes have intensified in recent years. Through global pandemics, economic upheavals, and full-scale wars, gold has responded by maintaining and steadily rising in value. In summary, CME Group says “There is nothing else in the world that is a substitute for gold.”
“Financialization” Cements Gold’s Value
The Gold Standard might be a relic of the past, but the yellow metal has remained a foundation of the world economy. In what the CME Group dubs gold’s “financialization”, the precious metal has become increasingly integrated into global financial markets. Currently, gold fulfills several crucial purposes for private and public investors: a store of value via gold reserves, a trade mechanism to bypass dollar-dominated markets, and a hedge against inflation in diversified portfolios. This deepening of gold’s financial ties has increased the number of market participants while reinforcing its role as a safe-haven asset, leading to greater value.
Gold’s Proving Grounds
A handful of events cemented gold’s status as a safe-haven asset in recent decades, according to the CME Group:
Global Financial Crisis
The US housing market crash ushered in a worldwide economic meltdown which wreaked havoc on investments across the globe. In the aftermath, investors–from central banks and financial institutions to retail investors–lost faith in the fiat-based system that contributed to the catastrophe. This 2008 financial meltdown reversed decades of gold net-selling throughout the 1990s and early 2000s and sparked a modern-day gold binge that has yet to fade.
Global De-Dollarization
The global push to de-dollarize has been another major milestone in gold’s rise to its highly coveted status as the go-to safe-haven asset. Although governments have tried to detether from the US dollar for decades, these efforts reached an inflection point following the Russian invasion of Ukraine. The West’s onslaught of dollar-backed sanctions encouraged the Kremlin and its allies to pursue gold to bypass international restrictions.
US Fiscal Policy
The CME Group points to misguided domestic fiscal policies as another significant boon to gold’s growing appeal. The reigning Modern Monetary Theory (MMT), which views limitless spending as a solution to mounting federal debt, has wrecked the dollar’s value. In its wake, this experimental policy has left a $36 trillion debt, inflationary pressures, and eroding trust in the dollar. The more the US pushes these flawed fiscal policies, the stronger the case for gold as a wealth-preserving alternative.
👉 Related Read: What Are Safe Haven Assets?