By: Jeff Clark, Senior Precious Metals Analyst Goldsilver.com
The anxiety in Europe has been slowly building. Last week the lid blew off.
As you probably know, Europeans have been grappling with a number of issues…
- Many stock markets have been teetering.
- The strategy for implementing Brexit remains confusing and unresolved.
- The popularity of anti-establishment politicians running in upcoming elections in Germany, France, and the Netherlands is growing.
- Throw in all the debt that continues to weigh heavily on virtually every country in Europe and you have people saying stuff like this…
- “The euro region could break up if political leaders don’t come to grips with the discontent that’s spurring support for populist leaders across the continent.” – Jamie Dimon, JPMorgan Chase CEO
- “Europe is in a major state of flux.” – Joe Jimenez, Novartis CEO
- “The consequences will be dire if the region breaks down.” – George Soros, billionaire investor
And then last week the snowflake landed that pushed investors over the edge… President Trump signed an executive order to withdraw the US from the Trans-Pacific Partnership with 11 other nations. Right or wrong, many Europeans feel this will impact economic growth in their region. And if growth slows, their economies will be in even greater trouble than they already are.
- It was the fund’s biggest weekly inflow in 5 years. It was more than 10 times the amount GLD received in the same week.
You can see that for at least 3 years buying was subdued, and for many weeks there were no purchases at all. Last year saw a noticeable increase, but it wasn’t until last week when inflows exploded.
This is just one of four gold ETFs in Europe. They all saw huge spikes in volume (Xetra-Gold was the biggest; it’s Germany’s GLD, so to speak). London, too, saw a lot of investors pile into gold ETFs.
GLD saw an uptick in purchases at the same time, but not near as much as the European ETFs. That’s because fear in Europe was much higher than in North America. And that’s the point:
- When fear grows, investors seek gold.
This altruism seems obvious. But it shows that the next time fear spikes here, we can expect a similar reaction to what Europe has seen.
And if you think a series of events is coming that will instill great uncertainty, confusion, worry, and maybe even panic in your fellow citizens, then you can expect to see an equally corresponding rush into gold.
You don’t need me to tell you what that kind of environment could do to the price. For those already invested, you’ll benefit mightily when that transition takes place.