It’s no surprise that this pandemic has had negative affects on all types of industries
throughout the entire world. Fortunately, this is not the case when it comes to gold. Although
the value and price of gold has been up and down throughout the year, gold prices have risen
the highest they’ve been in years. So those who have invested in gold or have some in their
possession are in luck, especially if they want to cash out. It’s a known fact that gold has
always been a source of security during economic hardships. Several factors influence the
price of gold, a few of them being inflation and demand; fear and uncertainty. Now lets take a
look at how the value of gold has fluctuated in 2020 due to the COVID-19 Pandemic.
As lockdowns were enforced and airports were shutting down, investors and central banks
seemed to pour money into gold. One of the reasons for this is inflation protection. Tangle
assets like gold, real estate and commodities have been known to be hedges for inflation.
At the beginning of 2020 the gold price was at around $1,517 per ounce. Around March 2-6,
the global markets started showing signs of strain due to the coronavirus. The United States
Federal Reserve (FED) enacted a sudden 0.5% reduction to Federal Funds Target Rate, this
escalated Bullion engagement. Then the largest stock market crash since the global financial
crisis of 2008 came on March 9, causing a drop of $144.57(-8.64%) on spot gold price. This
then lead to the Cares Act being introduced on March 19, which consisted of a $2.0 trillion
stimulus package, causing gold to go up $128.63 (+8.58%). Clearly, March was a chaotic
month for the Bullion. Throughout the first half of the year there were spikes and drops but gold
always remained a safe haven asset.
On August 7 the gold price rose to $2,075 per ounce and by August 12 it dropped to $1,863. In
the beginning of November Pfizer and BioNTech announced that they had a vaccine, that was
90% effective in studies. This gave a glimpse to what might be an end to the pandemic.
Investors transitioned into riskier assets from safe havens in anticipation that in 2021 there will
be an economic rise due to the vaccine. This immediately caused the price of gold to drop the
most its dropped in over 7 years. The reality of the situation is that it’s not all that simple. Even
though vaccines are being distributed very fast, the rate of infections and hospitalizations are
growing as well .
With the second wave of infections spreading through the globe, what's next for gold remains
unknown. Investors could be more likely to ignore a few more months of confusion ahead of
millions of people getting vaccinated. Depending on press leases on how the vaccine is
successful or not, will be one of the determinations for the future of gold.
The COVID-19 pandemic has made it apparent that gold serves an important role, regardless
of how investors modernize their portfolios. Gold responded as it should have during a time
when fear and dread struck the business sectors globally. Even though there is a plausible
reason to assume that, due to a vaccine and other means of treatment, the pandemic is
coming to an imminent end, the appeal of the gold proposal is diminishing. The value of gold
should decline, that is, before the next global crisis occurs and gold is once again used as a
safe haven.
The information provided here is not investment, tax or financial advice. You should
consult with a licensed professional for advice concerning your specific situation.