The price of gold has skyrocketed because of the global COVID-19 pandemic and the panic it has caused. Everyone is trying to get a handle on it, to find a vaccine, to stop economies from collapsing but it seems the end is not close. Experts say thing could take a while to return to normal.
The price of gold has been going up in recent months. The price has pushed past $2,055 per ounce because of the pandemic that has befallen the world and according to experts say that it could go on further because the pandemic shows no signs of abetting anytime soon.
It’s not just the health crisis we are facing that is pushing the prices as high as they have gone but there are important political events that are happening outside of the pandemic like the impending elections in the U.S which will have an impact on the dollar and subsequently, impact the price of gold. By the looks of things, the price of gold can go as high as $3,000.
During the 2007-2008 financial crises, investors set the gold price on an upward trajectory and it peaked at over $1,900 an ounce on the 5th September 2011. The price went down again and only recently has it returned to these levels but since the 1st of August, the gold price has risen by 15%. COVID-19 and the financial crisis it has created has made gold a wealth magnet. Fiat currencies are long their strengths. The U.S dollar has been faltering whilst and other world currencies are reeling.
Every country is throwing money at this crisis but this will have little impact unless a cure or a vaccine is found and the economy restarts in earnest. Throwing money at the problem is like putting a band-aid on a gaping wound. The blood is still flowing, the wound not healing as it should and the longer the wound remains open, it will fester and probably turn septic.
The natural response is to cut interest rates. Central banks have already gone low, so there is no more wiggle room, the have no more capacity to give a proper response. Those who still have money are putting it in safe haven investments like gold and other precious metals.
The Corona virus isn’t the only thing that is pushing the price of gold up. One other factor that has been pushing the gold price up is the purchasing of physical gold by central banks in India, Russia and China. Over the last five years they ramped up their purchases as if they were preparing for some major catastrophe, but they were doing what central banks are supposed to do: hedge their country’s wealth by investing in gold. Generally, for the past three year the world has been tittering on the edge of uncertainty.
According to analysts, even if a vaccine for COVID-19 is developed, the price of gold is likely to continue to go up. The damage would have been done and it would take years to repair the economy across the globe. It is expected that the gold price could continue rising over the next three years.