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Financial markets have experienced the fastest ever crash over the past few weeks. Even during the 2000’s dotcom bust and the 2008 Great Financial Crisis, stocks didn’t fall this quickly. In less than a month, we have seen major indices fall almost 30%, and stocks in sectors like oil and travel are down by 80%. South Africa’s credit ratings have been slashed to junk status and the rand has depreciated by more than 25% relative to the dollar this year. We are experiencing terrifying daily declines that we haven’t seen since the 1929 stock market crash that preceded the Great Depression.
We are at a watershed moment: Covid-19 is a catalyst fast bringing the creaking financial systems around us to a halt and it’s already changing our lives in all sorts of unpredictable ways.
When it comes to the virus, we are looking at a black swan event – something that happens once a century. We don’t have good data on what the stock market did during the 1918 Spanish flu, but we do know that it led to a severe recession.
Fortunately for investors, there are investments that tend to either hold steady in a downturn or rise when markets suffer. While history can’t predict what will happen in the future, gold has historically performed well in times of crisis — and it appears to be leading the pack again.
Gold is scarce, malleable, beautiful, universally precious and it has a couple of thousand years of trading history behind it. Although gold doesn’t generate an income, it is considered an insurance-like safe-haven investment option and it is widely recommended as part of a diversified investment portfolio. This is particularly true in times of turmoil and rapid rand depreciation, which is now down more than 25% relative to the dollar this year.
In the 2008 Great Financial Crises, when the stock…