Gold's Lustre Finally Revealed
Back in the beginning of March, I predicted that gold would hit $1,700 by the end of the month. And while it has taken just two weeks longer than that to do so, it has nevertheless reached expectations. Over the past few days gold has hit 7 year highs, and is currently trading above $1,720, showing no signs of stopping.
There was a delay in the yellow metal reaching its high and reaffirming its position as the king of safe havens, which was due to factors such as the shortage of physical gold in New York, and the fact that investors were initially selling their assets for liquidity.
However, despite all of these factors, the fundamentals were there. Everything was in the right position for gold to be king once more. For one, as risk appetite decreases, the price of gold increases as a result. Times of economic uncertainty are also where gold shines the brightest, and this is one of the most volatile and uncertain times we have seen in a very long time.
Another factor stopping gold from rising was the fact that the metal yields no interest, unlike its counterpart, the US Dollar. However, that is no longer a problem anymore, as the US Federal Reserve slashed interest rates for the US Dollar down to 0.25%, effectively meaning that it no longer generates interest either. And with the USD’s advantage against gold neutralised, gold’s safer status has led it to win out.
The amount of money the Fed has also promised to pump into the US economy to try and keep it afloat will also be of advantage to gold . Having promised to put as much money into bond purchases as necessary, the Fed will no doubt have to print more money eventually, thus devaluing the dollar as a result.
As long as the coronavirus crisis continues to have an economic impact, gold’s strength will only continue. Even as the immediate crisis fades, until the vaccine arrives, people will still have to practice social distancing to the best of their ability, which will cause the global economy severe strain. Even in a post pandemic world, there will be
Therefore, gold will most likely only appreciate in value and continue its bullish trajectory. Although it may flatten out soon, it should at least reach $1,800/oz fairly easily before starting to consolidate. Predictions of it reaching $2,000/oz in the next 12-24 months are also looking very solid at this rate.
There was a delay in the yellow metal reaching its high and reaffirming its position as the king of safe havens, which was due to factors such as the shortage of physical gold in New York, and the fact that investors were initially selling their assets for liquidity.
However, despite all of these factors, the fundamentals were there. Everything was in the right position for gold to be king once more. For one, as risk appetite decreases, the price of gold increases as a result. Times of economic uncertainty are also where gold shines the brightest, and this is one of the most volatile and uncertain times we have seen in a very long time.
Another factor stopping gold from rising was the fact that the metal yields no interest, unlike its counterpart, the US Dollar. However, that is no longer a problem anymore, as the US Federal Reserve slashed interest rates for the US Dollar down to 0.25%, effectively meaning that it no longer generates interest either. And with the USD’s advantage against gold neutralised, gold’s safer status has led it to win out.
The amount of money the Fed has also promised to pump into the US economy to try and keep it afloat will also be of advantage to gold . Having promised to put as much money into bond purchases as necessary, the Fed will no doubt have to print more money eventually, thus devaluing the dollar as a result.
As long as the coronavirus crisis continues to have an economic impact, gold’s strength will only continue. Even as the immediate crisis fades, until the vaccine arrives, people will still have to practice social distancing to the best of their ability, which will cause the global economy severe strain. Even in a post pandemic world, there will be
Therefore, gold will most likely only appreciate in value and continue its bullish trajectory. Although it may flatten out soon, it should at least reach $1,800/oz fairly easily before starting to consolidate. Predictions of it reaching $2,000/oz in the next 12-24 months are also looking very solid at this rate.
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