Investors in precious metals are aware that the price of gold is greatly affected by world events. The last few years have seen the major effects of Brexit and the Covid-19 pandemic on gold, with the most recent ‘black swan’ event being the recent developments in Afghanistan, possibly leading to further global economic instability.
Black Swan Events
The first few weeks in August saw the Taliban carry out a sweeping offensive through Afghanistan in a bid to seize control of the country. Reports have stated that the Taliban and al Qaeda are involved in a jihadist civil war with ISIS, with the USA and their allies being caught in the crossfire.
On Thursday 26th August, President Joe Biden addressed the US Nation in an emotional speech responding to multiple attacks near the Kabul airport, which killed and injured many Afghan refugees and U.S troops. Biden has stated in his speech that the USA will respond with “force and precision” and will continue to execute the mission to get Americans and their allies out of Afghanistan.
Covid-19 cases are reported to be growing internationally, mostly due to the highly infectious Delta variant of the virus, despite worldwide vaccination programmes.
UK case numbers of covid are much higher compared to this time last year. There is concern about what will happen in the autumn, as schools reopen and many people return to the office, as well as the cooler weather leading people to spend more time together indoors, all of which may lead to an increase in cases and disruption to businesses.
The World Watches
Historically, world events and geopolitical unrest have affected the price of gold hugely. So, what is the outlook for gold?
After the flash crash a few weeks ago due to stronger than expected job creation data in the US, the price of gold soon bounced back and has been swimming along on its way up again.
How the events in Afghanistan play out, and how much involvement the USA may have in the coming weeks, could greatly affect the price of gold as nervous investors seek out gold as a safe haven. And, as new covid-19 outbreaks continue to disrupt business operations, this adds to uncertainty in the world economy, signs that economic recovery could possibly be losing momentum.
Uncertainty is an important word in the world of precious metals, and we have certainly never seen times like these before. As we keep an eye on what is happening in the USA, in Afghanistan, and globally with the ongoing pandemic, these unexpected ‘black swans’ will no doubt have a further effect on the price of metals.
The world will be watching.
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.