Is the pandemic the right time to start stacking gold?
Soaring gold prices and the scarcity of coins, is linked to the coronavirus crisis?
The coronavirus pandemic rises up the appetite for gold.
The rise in the price of gold started several months ago already, it is true, but if it has accelerated for a few weeks, yes, it is because of the health crisis which is changing in a global recession. Uncertainty flies, stock markets are under pressure, interest rates fall, and that`s all good for gold.
In fact, the coronavirus was the real trigger for the crisis. We knew it was coming, it had been months since we saw gold go up and the stock market went up. So, there was one of them that should not go up, since it is very rare that the two goes up at the same tine. There was the trigger, which was the coronavirus. One does not have to be an economist to see that one is nevertheless plunged in a deep crisis which perhaps risks `` one does not know, nobody can say it certainly`` to worsen. Then we saw that around the world that Europe, the United States and Canada have made money to help the economy. What will the Canadian dollars be worth tomorrow? Will all the banks get by? There are actuall a lot of uncertainties, and on the stock market too, which makes people revert to gold that have safe haven status.
Exchange- traded funds backed by this precious metal have seen record flows, according to the World Gold Council. These ETFs drained 298 tonnes of gold in the 2nd quarter of 2020, seveb times more than in 2019. However, this did not lead to a sharp increase in demand, since at the same time the needs in jewelry are collapsed. This is largely due to the drop in consumption in the two main jewelry buying countries, India and China, caused by the containment measures.
The value of gold has risen sharply since 2013.
The value of gold has increased by 9% in the markets since the start of the pandemic. It is currently around $1800USD an ounce ( $2400 CAD). This is its highest level since 2013. This metal benefits in particular from the massive interest rate cuts, which make it more attractive to investors than government bonds, whose yield has negative rates.
Gold production was disrupted during the pendulum. In addition, supply is also suffering from the pandemic. Containment measures halted or slowed the activity of several large mines, causing production to fall in the first quarter. Airlines nailed to the ground also disrupted transport, particularly between South Africa and London.
Central banks have slowed their pace of buying gold. Industrial demand also saw a drop.
Prospects are excellent for gold.
This rebound in gold comes soon after it tumbled along with actions at the start of the pandemic. At that time, investors needed to raise liquidity quickly to respond to margin calls or to absorb their losses. Analysts, however, are optimistic about the long term outlook for the metal, as economic bailouts should force central banks to keep rates very low for a long time.
The fact remains that investing in physical gold will always be a good choice to protect your portfolio.