Gold is one of the best performing assets in the world this year, and gold’s lustre now appears to be appealing to a wider range of investors wanting a safe haven in which to protect their wealth. As prices continue their wild ride, reaching heights never seen before, we ask: why is everyone buying gold?
1. Other investment options are limited
Many other industries have taken large hits due to the COVID-19 pandemic. Bond yields are either near zero, even negative in some countries, meaning gold trading is now thriving. A zero interest-yielding asset, gold is anchored to monetary policy and inflation. Also, it’s worth noting that with stock valuations currently way above average, gold still looks cheap in comparison.
2. Global recession fears & the weakening dollar
Many countries such as the USA are still seeing high numbers of coronavirus cases, and fears are also growing of a possible second wave in other places such as Europe. As the USA has struggled to slow the curve of virus cases, this has resulted in the dollar being severely weakened.
Investors are also keeping a watchful eye on the ongoing trade relations between the US and China, after President Trump recently signed two executive orders banning two popular Chinese apps, TikTok and WeChat.
As world economies fear the impending economic damage caused by the COVID-19 pandemic, the shadow of a recession now looms across the world. Yet, as always, gold shines its brightest in the toughest of times.
3. An upward trend
Gold has risen in price dramatically, not only over the last few months, but there’s also evidence of a long term up trend in our favourite precious metal. The last ten years has seen the annual average price of gold pretty much double. This year alone has seen the price rise by over 35% as investors have flocked to gold in an attempt to protect their wealth against the current world financial climate.
Last week saw the price of gold in the US skyrocket, hitting the $2,000 mark for the first time ever. The evidence certainly suggests that trends seem to be only looking up in both the dollar & the pound for the near future, at least.
With so much happening in the world right now, I’m sure many active long-term investors in the gold market will agree, it’s hard to recall a time where there were so many reasons why gold was more alluring. A perfect storm, if you will.
A popular hedge against possible disaster for those of us in the know for a long time, gold is now more popular than ever! We are now seeing so many new investors flock to the market, leading us to think that we may have been on to something this whole time. Gold is possibly even the best performing asset in the world right now. We won’t say we told you so…
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.