Gold’s Price Swells As Misgivings Mount

Gold’s Price Swells As Misgivings Mount

over 3 years ago2 mins

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As the coronavirus pandemic enters a “new and dangerous phase”, the price of safe haven gold is approaching its highest since 2012 – but one big investment bank thinks the economic response will soon see the yellow metal swell to its most expensive ever 🤩

What does this mean?

With central banks’ interest rate cuts leading to poor returns from income-paying investments like government bonds, gold has proved popular. After recovering from a rush for cash in mid-March, gold’s price is now up 15% this year – sitting just below levels last seen eight years ago.

Gold’s dollar-per-ounce price is close to its highest ever (Source: Markets Insider)
Gold’s dollar-per-ounce price is close to its highest ever (Source: Markets Insider)

With the US and Brazil firmly at the forefront of a record daily increase in coronavirus cases over the weekend, and more details emerging of China’s confrontational new security law in Hong Kong, investors may now be feeling less optimistic about a “V-shaped” global economic recovery.

Derivatives traders – who bet on the future movement of gold prices – are at their most positive in a month. And they’re not the only ones. Investment bank Goldman Sachs is predicting gold will hit a record high of $2,000 an ounce within the next 12 months: in other words, another 15% rise from its present position 🏆

Why should I care?

While many investors think weak consumer demand and employment is likely to mean inflation will remain low (or even negative) in the near term, some think the eventual upshot of central banks’ and governments’ responses to coronavirus may be a rapid rise.

At the same time, many government bonds are currently offering negative yields: supposedly safe savings, in other words, will actually lose investors money. Buying gold offers protection from this erosion, as well as providing a “hedge” against inflation.

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For those sadly lacking a bullion vault, one simple way to invest is through an exchange-traded fund (ETF). And after reaching their highest levels ever earlier this year, ETFs’ gold holdings have risen further of late: on Friday, SPDR Gold Shares (which accounted for 75% of demand) boosted its own by the most in a year… 🤔

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