Why is gold a safe haven during market turmoil?

Gold prices have surged in the wake of the COVID-19 pandemic as investors look for safer places to park their money.

The precious metal has rallied 28 percent to $1,896 per ounce since bottoming on March 23. It is up 23 percent this year -- and within striking distance of its all-time high of $1,923.70, set in August 2011.

Ticker	Security	Last	Change	Change %
GLD	SPDR GOLD SHARES TRUST - EUR ACC	220.34	+0.75	+0.34%

Gold has “traditionally been one asset that people go to for safety,” said Ed Moy, chief strategist at gold retailer Valaurum and head of the U.S. Mint from 2006 to 2011.

A safe-haven investment offers diversification to an investor’s portfolio, helping it withstand volatility, or short-term swings in the prices of assets that are more vulnerable to market whims.

Safe-haven assets typically perform well during downturns and financial crises when riskier assets underperform.

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Gold is considered a safe haven because it has acted as a store of value, maintaining its purchasing power for thousands of years. The reality is that over the long term, the price of gold remains constant while the price of everything else goes up.

“People like to say 250 years ago, a man could buy a nice suit for an ounce of gold, and that’s the case today” Peter Schiff, CEO and president of Westport, Connecticut-based Euro Pacific Capital, told FOX Business.

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“But 2,000 years ago, a Roman toga was an ounce of gold,” he added. “Men have been buying a nice suit for thousands of years, paying with an ounce of gold. And I'm sure that'll be the same thing 20 years from now, even if a nice suit costs $50,000.”