Certain climate scientists, research economists, and precious metal investors agree: This year could be one of the hottest on record.
Climate Change and Economic Indicators
Climate change has long been a popular theme among left-wing media outlets, and this transitional El Nino-La Nina season has provided plenty of fuel for the fire. According to climate researcher Zeke Hausfather, 2024 stands a fighting chance of seeing the highest temperatures ever recorded, beating out a blazing 2023. Additionally, the earliest Cat. 5 hurricane recorded in the Atlantic has already struck the Caribbean islands, leaving behind devastating scenes.
Gold as a Safe Haven Asset
Fluctuating temperatures and ferocious summer storms may be valuable economic indicators in the gold market. In times of uncertainty, investors tend to flock to gold, driving supply down and boosting the price—especially during periods of political uncertainty. The World Gold Council suggests that gold’s carbon profile and decarbonization potential reinforce its role as a safe haven asset, risk hedge, and store of value.
Role of Gold in Decarbonization
Aside from weather-related events, gold prices are closely linked to how global leaders and public discourse respond to climate change. A 2023 study found a strong correlation between return volatility and two types of climate change risk: transitional and physical. Gold prices tend to fluctuate more in response to green energy policy changes than severe weather conditions.
As the world transitions towards clean energy and decarbonization, there is potential for gold mining to become more eco-friendly. The possibility of gold mining reaching net-zero emissions by 2050 could drive up demand for gold during the clean energy transition, leading to higher prices.
Gold in Times of Scarcity
In a worst-case scenario where resources become scarce due to global tensions escalating from various factors, including climate change, pandemics, or war, gold often remains a stable store of value. The 2023 study suggests that during times of real physical risk attributable to climate change, gold prices tend to hold steady, offering a sign to watch out for in the economy.
Conclusion
Climate policy decisions and public discourse significantly influence precious metal prices, as green energy agendas gain momentum and media coverage. Increased awareness of climate change risks can impact investor sentiments and the overall economy.
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