American Eagle Coins Design: The 35th-Anniversary Release
It’s simple: when the market moves upward, it’s the optimal time for investors to sell the gold they’d been keeping in store. But when the market goes downward, precious metal sellers start losing sleep.
But surprisingly, this has not been the case during the COVID-19 outbreak. Gold prices have slumped and have brought the market to a downward turn.
What influenced this change?
In this blog, we look at a few factors that affected the recent drop in the price of precious metals.
Strengthening of the dollar
Gold is traded worldwide in US dollar terms. Therefore, a higher value of the dollar means a drop in the prices of gold and vice versa.
Recently, the dollar saw the biggest weekly rise since the 2008 financial crisis as other currencies around the globe clamber for funds amidst the COVID-19 pandemic. This recent spike in the dollar influenced a fall in gold prices.
Volatility in the stock market
Due to the lockdown instigated by various governments worldwide, the global stock market saw a downturn of 25% in March 2020. Many analysts suspect the world economy will experience a financial crisis in the year due to rising concerns regarding the novel coronavirus.
The fluctuations in the stock market affect gold prices as many investors either start buying precious metals or sell them depending on the economy’s status during that time.
Due to the recent skittish behavior of the stock market, investors are opting to sell their gold rather than buying it.
Lower demand for gold
According to the traditional law of demand and supply, when the demand for precious metal rise, the price for gold also rises. However, the recent pandemic has forced many investors to sell their gold, thinning the demand for the precious metal.
Many argue the quality of gold to be used as a “safehaven” in times of financial distress is pushing more sales.But be it this or the increasing nervousness in the stock market, gold investors are now getting rid of the precious metal.
Rising treasury yields
To understand the connection between treasury yields and gold rates, you should know how bonds work.
So, here’s what happens: there is a negative relationship between interest rates and gold prices. The bond yield is the percentage of return of investment for a bond which affects the treasury yields.
When the demand for bonds drops as people start investing in higher risk higher return investments, the treasury yields become stable (as is the case right now),and the price for gold drops.
Even though the demand for gold is low right now, analysts and investment giants like Goldman Sachs speculate that the price of the precious metal will soon rise.
And many people will use it as a hedge against the rising inflation brought about by the COVID-19 pandemic.
We think this is an ideal time to invest in gold as you’ll get it at a good price and make a profit by selling it in the future when its demand rises.