In 2020, the Coronavirus crisis (COVID-19 pandemic) grips the nations around the globe and mounting economic damages has turned 2020 into the worst year ever. But the price of gold has sharply increased by more than 30% in 2020. Gold prices have surged in the wake of the COVID-19 pandemic as investors look for safer places to store their money.
On August 4th, 2020, Gold’s price climbed its highest level above $2000 ($2021 per ounce) for the first time in history. The last time gold prices hit a record high was at $1,917.90 on August 22, 2011. Market data show silver, platinum, and palladium also have strong gains in value. Historically, Gold price in Dollars has now risen by 325% over the last 15 years. According to statistics data, the increase in gold price far outpaced inflation, during the last decade. Even though there were occasional drops in gold prices, it always tends to recover after a few days or weeks. Gold usually climbs to new highs, especially if equities remain depressed.
The recent rise in the gold price was due to:
These drive more people to buy gold to find a safe-haven during uncertain times. “As long as uncertainty continues, gold prices could keep rising”, analysts said.
And so more and more floods of cash into the gold funds start to flow. A record hit inflow of $40 billion of gold into Gold E.T.F. arrived in the first half of 2020, the World Gold Council said. Nearly $30 billion of the U.S. Investor’s money made the biggest portion of inflow into Gold funds E.T.F investment. And a frenzy of investment in gold drove up the gold price higher and higher. Analysts call it a “Modern days gold rush”.
“Gold is a way of going long on fear,” Warren Buffett, CEO of The Berkshire Hathaway and renowned investor once said. In August 2020, his holding company Berkshire Hathaway Inc. changed the course and purchased 20.9 million shares in Canadian mining company Barrick Gold Corp (one of the world’s largest gold producers), in a transaction worth around US$500 million at the end of the second quarter.
The country’s economy has been ravaged by the ongoing Coronavirus outbreak in 2020. On June 8, 2020, NBER (The National Bureau of Economic Research) declared that The United States is in a recession, ending the longest period of uninterrupted growth in US history dating back to 1854.
Back in March 2020, the Federal Government pumped a $2.3 Trillion stimulus fund into the U.S. economy and also cut interest rates to zero in order to help keep the economy afloat and to prevent financial markets from freezing up. “What’s driving markets right now is Fed action,” chief investment executive at Morgan Stanley Wealth Management said.
Federal Government stimulus fund programs include Payroll Protection loans to small businesses, billions of lending options and equity loans to States, Credit, Securities, and Municipal Facilities, buying corporate bonds, and stimulus checks for individuals. This unprecedented action from the Fed is a major boost for businesses and powerful support for the failing economy.
But on the other hand, putting such an enormous amount of money in the system creates more government debt, and over time, it increases inflation and weakens the value of the dollar. According to Peter Schiff, CEO and Chief global strategist of Euro Pacific Capital Inc., “The extreme measures taken by the U.S. government and the Federal Reserve to combat the COVID-19 pandemic could push the U.S. into an episode of hyperinflation and boost gold.”The precious metal’s price should be up “a lot more” and Gold to hit $5,000 minimum, Schiff says.
Sources: Federal Reserve, NBER, World Bank, WSJ, NYSE, Bloomberg, Forbes, Fox Business, Yahoo Finance, Reuters, goldprice, Kitco
All of these bring more glitter to the reputation of this shiny, yellow bright precious metal than ever. And so, people want Gold, and it creates a market in itself.
Sources: Federal Reserve, NBER, World Bank, WSJ, NYSE, Bloomberg, Forbes, Fox Business, Yahoo Finance, Reuters, goldprice, Kitco
Moreover, people will continue to put their money in gold because, gold is always in “high demand” in the market due to its monetary value, incredible malleability, base metals for use in jewelry, industrial usages such as electrical connectors in computers, and other electrical devices, uses of gold in Aerospace and Dentistry.
Gold is always there for anyone including investors, governments, organizations, and even criminals to serves as a form of insurance against adverse economic events.
“Gold is the clear beneficiary of safe-haven demand,” a chief global markets strategist said. Truly, gold is a safe haven asset because it has proven to perform well during prolonged financial crises and retains or increases its value during times of market turbulence. That is why investors are diversifying their portfolio by purchasing gold in times of market volatility.
Many investors find gold as a “safe haven” as gold stays as strong as the monetary value in the financial market. Nowadays, people are investing in gold and so why don’t you?
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