Investors need to examine what this means for their portfolio.
First of all, you should not assume that because the euro is a European currency that the side effects of its collapse would be limited to Europe. In today’s globalized, interconnected world, finance moves literally at the speed of light. What happens 10,000 miles away may as well be next door.
As we have seen in the periodic flare ups of the ongoing economic and financial crisis in Europe, the initial beneficiary of weakness in the euro has been the US dollar. Should the euro collapse, the initial reaction would probably be similar. But this would be short-lived for two reasons:
1. Historically, currency crises benefit gold, which is a counterweight to the US dollar.
2. Those who flee the euro for the dollar will soon realize that the systemic and fundamental debt problems that have led to the euro’s demise also exist in the US–only worse. As a result, investors need to find alternative safe havens.
There is no silver lining for this cloud in terms of world stock markets. A collapse of the euro would send shockwaves across the oceans.
This is all the more reason why investors should seek to accumulate gold investments now, before a euro collapse.