February 25

A Year After Russia-Ukraine: Looming War with China?

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Almost exactly a year after Russia launched a full-scale invasion of Ukraine, we hoped there would be some resolution or cease-fire. But unfortunately, the opposite has happened. In almost every corner of the world, geopolitics are deteriorating. 

As a result, the case for investing in gold looks even stronger. 

There’s a reason why after Russia launched its invasion, demand for gold in Russia skyrocketed 5x. Panicked citizens scrambled to buy gold to protect their savings with “the crisis commodity.” 

Throughout history, gold has been a remarkable safe haven asset during economic and geopolitical uncertainty. In 2023, with the global world order as uncertain as it’s been in decades, the case for gold looks even more intriguing.

How close are we really to things spiraling out of control? Should the war in Ukraine be our biggest concern, with a more catastrophic war potentially lurking?  

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The World’s Precarious State 

A year on, the war in Ukraine appears only to worsen. In the week of the war's first anniversary, Russia pulled out of the New START nuclear arms treaty while threatening to push back NATO member Poland's borders.

It's not only Russia, however, that continues testing the limits of international norms. 

North Korea continues developing its missile capabilities, recently firing 4 cruise missiles into the Sea of Japan. 

Furthermore, Iran revealed a new long-range cruise missile and enriched uranium to 84% purity for the first time.

Yet worsening relations with Russia, Iran, and North Korea concerning updates are nothing like the growing threat of a war with China. 

A war with China would undoubtedly be the final domino to fall before WWIII. It would have severe and far-reaching consequences, destroying global economies, supply chains, and humanity.

The worst part? It’s closer to reality than you realize. 

Related: Inflation is Not Cooling - What this Means for Gold

Why a War With China Appears Inevitable

China’s increasingly harsh rhetoric, trade practices, spy activities, and military drills around Taiwan have been a cause for concern for years.

The meeting between U.S. Secretary of State Antony Blinken and China’s top diplomat Wang Yi on February 18, 2023, only fueled the fire following the incident of a Chinese spy balloon breaching U.S. airspace.

While the U.S. State Department called the spy balloon an “unacceptable violation of U.S. sovereignty and international law,” the Chinese foreign ministry called the U.S. response an “abuse of the use of force” Moreover, Yi warned the U.S. to prepare to bear all consequences from an escalation.

Yet the spy balloon incident is only a 60,000-foot overview of how close a war is to reality, with Huawei and TikTok allegedly even bigger threats than a spy balloon.

First is the issue of Taiwan. The CIA allegedly calls a Ukraine-style invasion inevitable by 2027. China’s rhetoric or military drills show increased readiness and aggressiveness. Additionally, the U.S. just expanded its troop presence in Taiwan to train troops. 

More concerning are deepening ties between Russia and China. A series of meetings between Russia and China on February 21-22, 2023, was alarming. Russia’s security head Nikolai Patrushev urged deeper ties with China to resist pressure from the West. At the same time, China stated that its focus on deepening ties with Russia has “no limits.” 

Joint naval drills between China, Russia, and South Africa in the Indian Ocean were an even more direct threat to the U.S. Worse, German newspaper Der Spiegel recently claimed that China is discussing supplying Russia with 100 kamikaze combat drones by April.

Related: Diversify Your 401(k) or IRA with Physical Precious Metals (Free Guide)

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The Catastrophic Consequences of a U.S.-China War

A war between the United States and China would have severe consequences for both countries and the entire globe.  

First, the economic consequences would be disastrous, as a war with China would significantly impact the world’s two largest economies. It would affect global trade, as China is currently the U.S.’s largest trading partner, and have a ripple effect on the rest of the world’s economy. Moreover, it would disrupt already bogged-down supply chains and grind industries heavily reliant on international trade and Chinese imports to a halt.

This type of economic disruption would also increase inflation since it would lead to mass shortages and overextended military budgets. 

Furthermore, a violent conflict with China would undermine confidence in the U.S. dollar as the world's reserve currency.

Yet the economic consequences of a war with China pale in comparison to the geopolitical and humanitarian repercussions. Such a war would likely involve bloody naval, air, and ground battles, crippling cyber-attacks, a mass loss of life, and human displacement.

The hypothetical casualties from the Sasakawa Peace Foundation's 2026 Taiwan war simulation are staggering:   

  • China 40,000  
  • Taiwan 13,000 
  • U.S. 10,700
  • Japan 2,500 
Looming war with China

The Key Takeaway: What This Means for Gold

With Russia's invasion of Ukraine showing no signs of stopping and the potential for a catastrophic war with China looming, the world is becoming increasingly unstable. 

However, this instability can also allow savvy investors to both protect their savings and potentially profit by buying gold

As a safe-haven asset, gold prices historically increase during major conflicts. Although the prospect of a world war is terrifying, investors should consider the potential benefits of investing in gold to protect their wealth.

If and when the war drums for the U.S. and China become louder, the price of gold would almost certainly increase sharply.  

All you have to do is look at recent history as evidence. 

Between December 15, 2021, when Russian hybrid forces launched seven attacks in eastern Ukraine, and roughly a week after its full-scale Ukraine invasion on March 08, 2022, gold’s price increased by 18.14% from $1,753.90 an ounce to $2,072.00 an ounce.  

If and when the gold bulls start anticipating a war with China as they did with Russia-Ukraine, Swiss Asia Capital’s $4,000 price target could be more plausible than you realize as investors flee from riskier assets, and seek the relative safety of gold, driving up demand and prices.

Did you expect the world to be this close to WWIII a year after February 24, 2022? Where do you think the world will be on February 24, 2024? Of course, everyone hopes that things get better. However, being prudent and preparing for the worst before it’s too late should also be on your mind. In times like this, turning to gold is often the best move. 

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About the author 

Robert Samuels

Robert Samuels is a financial copywriter and business advisor. After teaching himself stock market basics and financial fundamentals, he leveraged this newfound passion into a Master’s Degree from Harvard University’s ALM Finance extension program, where he received a 3.87 GPA and Dean’s List distinction.

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