Home Could Gold be the Answer to the Global Financial Crisis?

Could Gold be the Answer to the Global Financial Crisis?

As Italy prepares to leave the EuroZone, investors are beginning to show more interest in allocating their money into assets like gold, with limited risk.

A report issued by Rosa & Roubini Associates indicated that if Italy did decide to leave the European Union like the UK has begun to do with their Brexit deal, the result might be a global financial crisis. As political issues around the world continue to harm the economic standing of various countries, it’s not surprising that investors would want to embrace a less risky approach to their investment, with a strong focus on defensive positioning.

Gold has always been a feature in the most diverse and risk-ready portfolios. Gold is known as a powerful hedge for investors who want to protect against potential asset class corrections.

What Does Italy’s Decision Mean to Investors?

If Italy does decide to leave the European Union and give up the Euro, then the financial market will begin to suffer, causing problems with both long and short-term trading rates. Investors have seen this issue arising in the last few weeks, and many forward-thinking individuals have already started to make a move towards gold and precious metal investments. Most of the people representing the younger generation are buying gold through online shops.

The conversation around Italy possibly leaving the EU emerged once again in the investor marketplaces this month as populism in the nation continued to rise. The Five Star Movement and the League are both seeing a lot of support lately, and each has risen to power because they believe that the euro hasn’t done enough to help the country succeed economically.

Today, the GDP for Italy per capita is currently much lower than it was when the euro was first launched in 1999, particularly when you compare the price to Italy’s European cousins like Greece and Germany. The Italian populist groups have rallied behind these worrying statistics and begun to use them as reasons to exit the EU once and for all so that Italy can start fresh.

Support Rises for an EU Exit on All Sides

Rising support for the decision to exit the EU in Italy could be enhanced by the fact that it’s difficult for the country to periodically devalue their currency and regain competitiveness in the EU. According to the report issued by Rosa and Roubini Associates, though the euro has its limitations, Italians may be forgetting about its benefits as a single EU currency, which include lower interest rates, and a fall in servicing costs for Italy’s debt.

While some Italians will remain unsure about the decision to leave the EU, and it’s currency behind in the months ahead, the country might begin to push towards this exit more aggressively once they feel that they have what it takes to compete in the global economic field.

For now, the issue of Italy leaving the EU is one that’s sparking heated debate around the world. In September, we may already start to see some movements from the country, as the new government will need to draft a budget at this time to send through to Brussels. If the budget introduces a minimum income policy, flat tax system, or begins to backtrack the pension scheme implemented by the previous currency, it may spark the start of a battle between Italy and the EU.