Expect the Unexpected
A "Tail Risk" is an event that has a low probability of happening, but a catastrophic impact if it does. Conventional portfolios are rarely hedged against these events.
Examples of Tail Risks
- Geopolitical Conflict: War disrupts supply chains and drives flight to safety.
- Sovereign Debt Default: A major nation failing to pay its bonds.
- Currency Crisis: Hyperinflation or loss of confidence in a fiat currency.
- Cyber Attack on Banking: Digital assets becoming inaccessible.
Gold's Role
Gold has no counterparty risk. It does not rely on the power grid, the internet, or a government promise to exist.
In a true crisis, liquidity dries up. Stocks freeze. Bonds crash. Gold remains liquid and universally accepted. It is the chaos hedge.