The economics of gold… Trade of war and peace

The economics of gold… Trade of war and peace

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Researcher Shatha Khalil
In the midst of tensions and crises, investors are accustomed to the fact that tension is directly and quickly reflected in gold and oil , the main drivers of the economies of the world. Gold prices rise in the war and during security and political tensions because of the high demand for it, being the safest haven to prevent waste of wealth , and sensitivity of gold towards war … and peace ” and fear of the negative consequences of the war.
Gold is a precious metal that has been known for thousands of years and can exist freely in nature or mixed with other elements. It is a bright and dense element, one of the most soft metals, and is found in the deposits of rivers and rocks.

Gold has been used for thousands of years in making coin, because gold is a highly valuable material and has been used in financial transactions for a long time.

Gold is widely used in the electronics industry because of its important properties such as its ability to deliver power efficiently and high corrosion resistance, making it ideal for low-voltage devices such as mobile phones, television and wires.

Gold is used in the manufacture of computers because of its excellent conductivity, and is used in dentistry, because it is inactive elements, and because of easy to deal with and the use of it for cosmetic fillings.
Gold retains its value because it affects monetary policy, and the global economy often relies on gold prices up and down.

Gold is one of the most famous metals used in jewelry, and has been used by women for decoration throughout the ages. It is manufactured and treated in the form of alloys, a mass of pure gold that melts to be processed in the form of different jewelry.
Gold is classified according to the caliber, and the caliber is calculated by the proportion of gold compared to the percentage of other metals that make up the ornaments, where the ratio of gold if the 24 caliber is high compared to gold 18-caliber, because the proportion of metals blended with gold is greater, so the price of gold grams of 24 more than the gold, 18 -caliber.
As a result of the sharp tensions between America and China, US President Donald Trump’s threat to increase tariffs on Chinese imports sparked trade tensions again between the two countries, prompting investors to seek safe haven assets, gold, which was directly reflected in rising gold prices to more than 1.5%, hitting its highest level in more than three months, amid fears that the global economy was hurt by trade tensions between the United States and China, and Washington’s threat to impose tariffs on Mexico.

The sudden rise of the price of gold rose records 0.1% to $ 1281.70 an ounce, and futures contracts fell 0.1% to $ 1282.70 an ounce, amid escalations on the front of the US-China trade war. These tensions have prompted traders to abandon high-risk assets such as equities, and currency purchases, against a basket of six major currencies, the dollar fell slightly to 97.71, although it is still up 1.6 percent since the beginning of the year.
According to data from the World Gold Council, based on data from the International Monetary Fund, the total reserves of the world amounted 33.87 thousand tons.
This figure represents the official reserves of central banks around the world, and the gold supply is not counted for commercial purposes in retail markets (jewelry).

This is the list of the most gold-winning countries that are led by the United States:
1. US Gold Reserve: 81333.5 tons.
The United States is the world’s largest gold holding, especially since the dollar is the world’s reserve currency for any country.
2. Germany: Gold reserves: 3395.5 tons.
Germany is likely to maintain its current asset base, with Germany as the locomotive of the economy in EU and Euro zone countries .
3. Italy: Gold reserves: 2451.8 tons, Italy is in a state of financial turmoil, and according to many measures Italy is one of the most vulnerable economies for the danger according to the rest of the euro zone countries.
4. France: Gold reserves: 2435.4 tons.
France finds itself in a good position. Former President Francois Hollande opposes many austerity measures taken by his predecessor, President Nicolas Sarkozy.
5. China: Gold reserves: 1054.1 tons.
It is true that the Chinese economy is facing a period of stagnation and the growth rate has fallen to 7.4%, but China is seeking to be the largest economy in the world.
6. Switzerland: Gold reserves: 1040.1 tons.
Switzerland is the most country with banks in the world, so it is naturally one of the most gold-holding countries.
7. Russia: Gold reserves: 936.7 tons.
Russia continues to buy gold, as it has an ambitious global economic growth.
8. Japan: Gold reserves: 655.2 tons.
Japan is one of the largest economies in the world.
9. Netherlands: Gold reserves: 612.5 tons.
It is not surprising to see that the Netherlands possesses huge amounts of gold, as it is worth mentioning that the Netherlands is a former colonial power and has a long history of wealth.
10. India: Gold reserves: 557.7 tons, while India ranks 11th in the world according to the list of the World Gold Council, it occupies tenth place excluding the International Monetary Fund.

In summary, gold has been and remains the appropriate investment tool to protect wealth. All developments have proved a constant inverse relationship between investing in gold, investing in stocks, and the longer the investment lasts, the more the reverse relationship becomes stronger , this is to confirm the importance of gold to face the fall of prices in global equities, and “inflation”, in turn, is a prime reason for investors to resort to gold being – the inflation – removes the real value of several types of property, so when investors feel the rise of inflation rates , they resort to gold because it has a fixed value, at the time the value of currencies are exposed to a certain decline , gold always maintained its value, and sometimes record a rise in the price, as it happened recently when the ceiling exceeded $ 400 per ounce, for the first time since the year 1991 in
light of the disruption of the European exchange mechanism.

Translated by : mudhaffar al-kusairi

Economic Studies Unit
Rawabet Center for Research and Strategic Studies