Gold is shining against Coronavirus and the world has taken notice of that. This metal gained traction soon after the COVID19 crisis started.
Gold has never been so popular. The price of this precious metal has reached new all-time highs in recent days and could do even better. The price of the 31 g ounce was trading Friday at $2035 per ounce, above the symbolic $2,000 per ounce mark, well ahead of its previous record ($1921) set in September 2011.
Since 1 January, the yellow metal has soared by more than 32%.
Why this record level?
There are many reasons. As a safe haven, gold is a sought-after and reassuring investment in times of crisis. The other assets are pale in comparison: bonds offer very low returns, equities – with the exception of Gafa – suffered from the recession, real estate is affected by commercial and corporate bankruptcies and rising unemployment.
The current monetary policy itself favors the purchase of gold. The only response by governments is to explode their budget deficits and for central banks to run their banknote printing presses at full speed to buy government debt and support the economy, this decreases the money worth.
At the same time, the dollar is suffering from the pandemic that the United States is struggling to manage. This weakening directly benefits gold indeed, it is denominated in dollars: the slightest drop in the dollar makes it cheaper, and therefore more attractive to investors who buy it, which pushes up its price.
Who is buying?
More and more private individuals are disappointed with the yields on bonds. But investment funds and central banks remain the biggest buyers. ” In a fairly new development, international banks are advising their clients to buy them.
Can this boom last?
It’s well on its way. The previous peak in 2011 was linked to fears of an explosion in the eurozone following the sovereign debt crisis, particularly in Greece, which was finally resolved by a massive aid package that brought down those fears and the price of gold.
Today, we are only at the beginning of the recovery plans and the major central banks have clearly announced that they are setting no limits “to support the economy. “Although we will adapt to this virus, it is clear that the current monetary policy will continue.
Is now the time to buy gold?
Gold is shinning against corona virus. But is this the right time to buy?
If gold offers no dividend or interest, it is not a volatile value. It’s hard to say how long its rise will last, but we shouldn’t expect a radical decline. As for selling, experts advise against it unless you need cash. Gold climbs regularly: In 2000, when the 1 kg ingot closed the year at 9500 euros, everyone said that it could no longer climb, that we had reached a peak… Today, it is over 55000 euros.
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