As the COVID-19 pandemic continues to cause chaos to economies across the world - fuelled by recession fears and low interest rates, investors have turned to safe haven assets such as gold to protect their wealth. As a result, gold prices have hit record highs and many analysts are betting on gold possibly gaining even more momentum. Here we look at three reasons why gold prices could continue to rise.
1. Cases of Covid-19 are on the rise
Many countries such as the US and India are currently seeing a hike in the number of Covid-19 cases. On Sunday, Florida alone recorded over 15,000 new cases – the most cases any state has ever had in a single day since the beginning of the pandemic. Second wave fears are also growing in other countries, with some having to reintroduce lockdown restrictions in certain areas.
Since the Covid-19 pandemic began to take hold in February, investors have flocked to the safe haven of gold. With many other industries taking large hits due to the pandemic crisis, gold trading has thrived, and the price has surged - even hitting record highs in the UK during the peak of the virus.
World economies are now fearing further economic damage caused by the virus. Many companies have already had to announce closures and job losses. A global recession is expected, with UK Chancellor Rishi Sunak stating last Wednesday that 18 years of GDP growth had been pretty much wiped out in only two months, due to lockdowns. The UK government then announced measures to attempt to reduce the economic damage the pandemic has caused, with many of these measures meaning more government spending. This leads many of us to wonder: how will this spending be paid for in the years to come?
With infections still rising in many countries, the economic and geopolitical environment only appears to remain supportive for gold.
2. Ongoing price trends are positive
Looking at the price over the last 15 years, gold has risen dramatically. In July 2005 the spot price of an ounce of gold was around £242. Fast forward to the same month ten years later, we saw the price rise dramatically to £746. The same month this year, we are currently seeing the price of gold sitting at around £1430.
In this last fifteen years alone, we have seen the annual average price of gold in GBP rise by a total of around 11.8%. In fact, except for 2013 and 2015, the annual average price of gold in GBP has risen every single year in the last fifteen years, with this year rising by around 24% so far.
3. Options are limited
As stated earlier, many other industries have taken large hits due to the pandemic, yet gold trading has thrived. Low or negative interest rates and poor returns on other investment options mean gold is sitting pretty in the spotlight and it is shining brighter than ever before. With the coronavirus pandemic still impacting greatly, gold looks to be an excellent choice for many investors in a current world with limited options.
Due to its status as a safe-haven, gold is riding high on serious momentum. Investors are still running towards the lustre of precious metals, and it is hard to remember a time like this when there were so many reasons why gold’s allure was more attractive to those who require a store of value in an ever-changing world.
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.