Banking Crises: Why Gold is the best Defense for our Wealth

The financial crisis of 2008 – a milestone in the history of banking crises – serves as a warning example of the vulnerability of the global financial system. The crisis was triggered by a combination of a bubble in the real estate market, risky financial products and a lack of regulation. These factors led to a collapse in confidence in the banking system and triggered a global recession.

We are facing similar challenges today. The current risks in the banking sector include high levels of debt and aggressive lending - exacerbated by low interest rates, which are being maintained by the European Central Bank's interest rate policy. Political uncertainties and geopolitical tensions further increase the risks.

The situation of Deutsche Bank, which trades in derivatives worth eleven times Germany's gross domestic product, is particularly worrying. Equally alarming is the fact that EU banks hold an average of only 1.23% of their deposits as reserves. The global shadow banking system, which is difficult to regulate, further contributes to systemic risk with a volume of around 52.6 trillion dollars.

The current harbingers of a crisis are revealed by specific indicators and structural weaknesses in the global financial system. These include not only traditional banks, but also the shadow banking system, which is difficult to monitor.

One key aspect is the significant growth in risky financial products, particularly derivatives, which often involve complex and opaque risks. Added to this is the increase in non-performing loans, which were granted under easier conditions due to the economic impact of the COVID-19 pandemic and which has impaired the repayment capacity of many borrowers.

Risks are also evident in the increasing global debt, which is particularly evident in emerging markets and which are threatened by a debt crisis due to the return to conventional interest rates. All in all, these factors form an explosive mix that could destabilize the entire financial system.

With growing signs of an impending global financial crisis, it is critical that both individual and institutional investors take immediate action to protect their wealth. Four key measures are recommended that can ensure financial stability:

• Diversification of investments: A well-diversified portfolio can help spread risk and mitigate the impact of market fluctuations on overall wealth. Investors should consider spreading their investments across different asset classes such as equities, bonds, real estate and precious metals to offset potential losses in one area with gains in others.
• Review liquidity reserves: Sufficient liquidity is crucial to remain capable of acting in financially uncertain times. Investors should ensure that they have sufficient liquid funds to offset short-term liabilities. In this way, they avoid being forced to sell long-term investments under unfavorable conditions.
• Debt reduction: In a financial crisis, high debts can be particularly burdensome if income is falling at the same time. It is therefore wise to actively reduce debts with high or variable interest rates in particular. This reduces financial risk and improves financial stability.
• Creation of contingency plans: It is important that both companies and individuals develop robust contingency plans that include clear strategies and actions in the event of a worsening crisis. These plans should include relevant guidelines for cash management, cost reduction and other emergency responses to ensure that quick and effective action can be taken.

By implementing these steps, investors can not only strengthen their positions in uncertain markets, but also be better prepared to navigate through potentially turbulent times.

After analyzing the risks and necessary preparatory measures, it is crucial to know a proven strategy for asset protection. Gold and other precious metals offer this security and are indispensable in times of economic uncertainty.

Gold has proven to be a stable investment in a historical context and in times of economic turbulence. It serves as a hedge against inflation and currency devaluations. While stock markets and currencies can be subject to strong fluctuations, gold retains its value. This stability is the result of several factors:

• Limited supply: Gold is a limited and scarce commodity. Its supply cannot be increased quickly, even if demand increases. This scarcity contributes to its stable value, as the market cannot be flooded with gold.
• Independence from financial markets: Gold has no direct correlation to equity and bond markets. It is less affected by market volatility, which makes it a stable investment in times of market uncertainty.
• Inflation protection: In times of high inflation, currencies tend to lose value. Gold, on the other hand, retains its value and thus protects assets from losing purchasing power. This makes gold an attractive form of investment in times of economic uncertainty.
• Safe haven: In times of economic crisis, investors traditionally flee to gold. This increases demand and supports the price. Gold is seen as a safe store of value, which is a great advantage in times of financial instability.

However, investing in precious metals also requires careful planning and diversification. The following strategies have proven their worth in the past:

• Buying gold directly: Purchasing physical gold such as bars or coins offers the advantage of direct control. It is important to buy from reputable dealers and to store the gold securely. Physical gold can be sold easily and therefore offers quick liquidity in an emergency. Safe storage is essential - whether at home or in a vault. Insuring physical gold can provide additional security.
• Precious metal funds and precious metal certificates: These financial products enable indirect investment in gold and offer high liquidity. Investors can benefit from price movements without having to own physical gold. Funds and certificates offer the advantage of professional management and are easy to trade, which means flexibility and lower transaction costs. They are a practical alternative for those who do not wish to invest in physical gold.
• Gold mining shares: Investments in gold mining companies offer an interesting opportunity to profit from the development of the gold price. However, these shares are more volatile than the gold price itself and entail additional risks. Careful selection and diversification within this sector are therefore crucial. Gold mining stocks offer the potential for high profits, but also the risk of losses, which must be taken into account, especially in times of rising production costs or falling gold prices.
• Diversification within precious metals: In addition to gold, silver, platinum and palladium can also be valuable additions to a precious metal portfolio. These metals offer additional diversification and can perform differently in different market conditions. Silver is used both as a precious metal and as an industrial metal, while platinum and palladium have mainly industrial applications that can influence their demand and prices.

Thoughtful integration of gold and other precious metals into an investment portfolio can significantly reduce financial risk. These investments not only offer protection in uncertain times, but also the opportunity to stabilize assets and benefit from market distortions. Precious metals are therefore an essential component of an investment strategy in the event of impending banking crises, as they are aimed at long-term security and value stability.

Current developments clearly show that the global financial system is affected by considerable instability. The signs of impending banking crises cannot be overlooked. It is simply important to be prepared for banking crises. Early identification of trouble spots and taking timely action are crucial. Investors should therefore diversify their portfolios, hold sufficient liquidity reserves, reduce debt and draw up clear emergency plans. These steps help to protect your own assets and ensure financial stability.

Gold and other precious metals are indispensable. Their ability to retain value in uncertain times makes them an important component of an investment strategy in the event of impending banking crises. Whether through physical ownership, funds, certificates or mining shares - precious metals offer a solid hedge.

Now is the time to act proactively before it is too late. The warning signals that can no longer be overlooked should be taken seriously and investment strategies should be adapted accordingly. Those who are prepared will be better able to get through times of crisis and protect their assets.