We focused recently on the developments in China and the U.S. Meanwhile, Europe is experiencing the world’s biggest refugee crisis since the Second World War. Could it affect the gold market?

According to the European border agency Frontex, more than 500 000 migrants were detected at the external EU borders in the first eight months of this year. By comparison, in the entire 2014, there were 280 000 detections at EU borders. What caused such an increase in immigration? The first reason lies in the U.S. and European interventionist foreign policy, which destabilized the Middle East. This is why so many people are fleeing places like Syria, Libya, or Afghanistan. The second reason is the social welfare in Europe, which attracts many immigrants seeking a better life.

Here lies the biggest controversy about the current crisis. Are the migrants refugees (if yes, no problem, we will help them) or economic immigrants looking for work (still ok, but some are afraid that such immigration will result in less jobs for the native population and in cultural problems, since most of the migrants are Muslim), or maybe a lazy and demanding crowd counting on social benefits and setting off bombs in their free time (definitely not very ok)? The Guardian’ article says that the majority (around 70 percent) of migrants are refugees, not economic immigrants. On the other hand, many immigrants want to get to rich countries, like Germany, and do not want to stay in the first safe country, like Greece. Moreover, according to the UN High Commissioner for Refugees, 69 percent of migrants are men. These facts indicate economic rather than political motives.

Anyhow, the immigration crisis matters not only for politics and ethics, but also for the economy. On the one hand, immigration could boost the labor force and support the pension systems, especially in countries with a rapid ageing population, like Germany. On the other hand, they could put pressure on the social system, raise anti-immigration sentiment and completely dismantle the free movement of persons and further divide the European Union. Some countries have already reintroduced border controls, suspending the open borders Schengen agreement.

The key takeaway is that although the immigration crisis could have far-reaching consequences for the future of the European Union, it has not affected the gold market so far. There may be some safe-haven demand for gold in the future if the current crisis continues to evolve (and causes riots or whatever), however, since the problems are limited to Europe (and developing countries), its impact on the price of gold should be minimal or even negative, if we see further appreciation of the U.S. dollar.

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Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

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