After rising to record-breaking highs during the summer of 2020, the price of gold has fallen steadily since it’s peak. The tail end of last week saw gold drop which prompted some heavy buying activity from investors looking to buy the dip.
What’s been happening with gold?
The price of gold has dropped by around 10% since the start of the year. After kicking off 2021 at around £1,391, the precious metal has seen a steady decline, and hit a low of £1,247 on Friday 26th February.
So, the question must be asked: has gold lost some of its shine?
One recent large trigger for gold has been the rising 10-year Treasury yields in the USA, as well as a stronger US dollar. As traders focused on a recovery from the Covid-19 pandemic and higher treasury yields, gold became less competitive. The European markets have been more optimistic due to cases of coronavirus dropping and a quicker than expected vaccine deployment, as well as healthy manufacturing data, which has also impacted gold negatively. Recent heavy demand for silver has also influenced the price.
Where is gold heading?
Of course, it’s impossible to accurately predict where the price of gold may be heading next. However, lockdowns have heavily impacted on the UK economy, and as Boris’ roadmap to recovery comes into play and the country slowly begins to open its doors again, we can only sit and watch to see where this may take us. Many businesses have suffered deep losses, and we may yet see an economic contraction deeper than we have ever experienced before, which of course will have a knock-on effect on gold prices.
It’s always a good idea not to be too short-sighted, and to look at things in the long term. As we have noted before, there is evidence of a long-term uptrend in gold. The last ten years has seen the annual price of the precious metal pretty much double.
Gold may be merely catching its breath. Prices have already shown signs of steadying as of early Monday morning (March 1st, 2021) as the dollar dropped from a one-week high, increasing gold’s appeal.
Buy the dip!
A dip in the market price is always a buying opportunity.
The gold market has been busier than ever over the last year, and this weekend was no exception as many smart investors took advantage of the lower price to ‘buy the dip’. Although we now see signs of gold prices steadying, the price is still sitting relatively low compared to those 2020 heights. Could now be a good time to buy?
If we look to the long term - with so much happening in the world, and such future financial uncertainty around the globe, gold may well be on the road to recovery as investors again and again look to the store of value that has been proven for centuries: our old friend, gold.
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.