How Geopolitical Tension Changes Gold Investment: A Retirement Advantage
Turbulence in recent global politics offers bittersweet support for investors interested in gold IRAs to protect their retirement.
The gold bull run that began in early 2022 came right after an especially intense cycle of interest rate hikes, with the Federal Reserve raising the benchmark federal funds rate 11 times in 2022 and 2023, to 23-year highs.[1]
Gold rose more than 40% over those two years until the day interest rates finally came down. [2]
Why did this happen? Analysts believe it was in part due to investors hedging their investments with gold globally against uncertainty—with geopolitical uncertainty being the strongest driver of gold prices during this recent gold bull run. [3]
Specifically, analysts around the world have noted the elevated political risks associated with the Russia and Ukraine war [4], continued U.S. tension with China (much of it related to the sovereignty of Taiwan), and ongoing war in the Middle East.[5]
Analysts watching these kinds of influences on precious metals noted in early October 2024 that hundreds of missiles fired at Israel elicited a very clear response from gold prices that illustrates just what can happen with the yellow metal in times like we are experiencing right now.
The day Iran fired an estimated 200 missiles into Israel, all major indexes dropped [6], but gold surged.
Gold's perceived safe-haven properties triggered the metal to rise as much as 1.5% that day, ending the following day up about 1%.[7]
This is a testament to the way investors around the world view gold as a tangible store of value.
“It’s instinctive safe-haven buying,” said Tai Wong, a New York-based independent metals trader, about the reason why gold jumped as it did that day.[8]
That same kind of instinct has caused a boost in gold and precious metals before.
- When Hamas attacked Israel on October 7, 2023, gold rose about 2% and silver climbed more than 4%. [9]
Brien Lundin, editor of Gold Newsletter, said it was “bad news for the world and, in a typical bittersweet fashion, good news for gold bulls.”[10] By the end of the month, both gold and silver had shot up even more.
- At the outset of Russia’s invasion of Ukraine, gold jumped about 13% – even going above $2,000 per ounce.[11]
The next question is, what is the outlook for geopolitical turbulence as it relates the potential outlook for gold? No one knows for sure, of course.
Prices at times like this often surge then subside, but significant developments on the world stage along with other economic factors can turn the surges into broader price uptrends.
The World Gold Council cited both the Russia-Ukraine war and the Israel-Hamas conflict as some of the most significant sources of gold price influencers in 2023. The council said that the two conflicts should remain prime sources of gold support this year. [12]
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Goldman Sachs believes gold will continue to rise through at least 2025. They identified gold as their “preferred near-term long” and said the metal is their “preferred hedge against geopolitical and financial risks.”[13]
In a report earlier this year, analysts at Amundi, one of the world’s largest asset managers, said:
“We expect geopolitical risk will remain elevated for the next several years as a result of the growing number of actors involved, the tectonic geopolitical and technological shifts underway, and deteriorating bilateral relations.”[14]
Analysts at BlackRock, the world’s single-largest asset manager, suggested there is a high probability these risks could be on the horizon:
- U.S./China tension continues to escalate.
- The war in Ukraine becomes protracted beyond Ukraine.
- The Middle East conflict threatens energy and raises volatility.
- A potential terror attack leads to significant disruption. [15]
Not cheerful news. But there may be a silver lining for investors who have made their portfolios more resilient to these shifts in anticipation of ongoing geopolitical upheaval.
Gold is one asset investors continue to seek, and with the help of a 1997 tax code they can not only gain the benefits of gold but take advantage of tax benefits as well. [16]
Many Americans have sought this kind of protection for their savings using a gold IRA. And there are companies that specialize in making the process very easy for investors who decide this is the right choice for them. (If you consider using this asset, please be sure to discuss the tax implications of IRAs with a qualified tax professional.)
For more information about geopolitics and gold investment, please read the full article titled “Safe-Haven Gold Shines as Middle East Tension Surges” at the Augusta Precious Metals website.
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[1] FederalReserve.gov, “Open Market Operations” (accessed 10/3/24).
[2] CNBC.com, “Gold COMEX (Dec′24)” (accessed 10/3/24).
[3] Greg Bartalos, Barron’s, “Gold Is at a Record High. Why It Is Set to Rise Even More.” (April 3, 2024, accessed 10/3/24).
[4] Andrew Osborn, ThePrint, “Russia’s invasion of Ukraine plunged Europe into ‘biggest land war’ since WWII, says report”
[5] Congressional Research Service, “Israel and Hamas Conflict In Brief: Overview, U.S. Policy, and Options for Congress” (August 1, 2024, accessed 10/3/24).
[6] Alex Harring, CNBC.com, “S&P 500 falls, Nasdaq drops 1% to start October as Middle East tensions intensify: Live updates” (October 1, 2024, accessed 10/3/24).
[7] CNBC.com, “Gold COMEX (Dec′24).”
[8] CNBC.com, “Gold jumps over 1% on safe haven demand after Iran’s attack on Israel” (October 1, 2024, accessed 10/3/24).
[9] London Bullion Market Association, “LBMA Precious Metal Prices” (accessed 10/3/24).
[10] Myra Saefong, MarketWatch, “What Israel-Hamas war means for gold as investors seek safety” (October 16, 2023, accessed 10/3/24).
[11] Wilson Center, “Two Years of War in Ukraine: Timeline to Invasion” (January 1, 2024, accessed 10/3/24).
[12] Charmaine Jacob, CNBC.com, “Gold demand hit record highs in 2023 amid geopolitical risks, China weakness” (February 2, 2024, accessed 10/3/24).
[13] Goldman Sachs, “Gold prices forecast to climb to record high” (September 12, 2024, accessed 10/3/24).
[14] Anna Rosenberg, Lauren Stagnol and Takaya Sekine, Amundi, “Geopolitical risk will grow: here is how we track it” (May 2, 2024, accessed 10/3/24).
[15] Sovereign Wealth Fund Institute, “Top 100 Asset Manager Managers by Managed AUM” (accessed 10/3/24); Rosenberg, Stagnol and Sekine, “Geopolitical risk will grow.”
[16] Tax Notes, “JCT Summarizes Revenue Provisions in ‘Taxpayer Relief Act’” (August 1, 1997, accessed 10/3/24)
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