COVID-19 Vaccine Improves Outlook, Yet Gold Remains Relevant
Global economy halting events such as the early 2000s dot-com bubble, the 2008 recession, and now the coronavirus pandemic has taught invaluable lessons to investors all over the world. It has been repeatedly recorded that gold and silver take flight when global stocks and equities plummet.
For example, during the worst financial crisis from October 2007 to October 2010, gold rose by 78.9%, while the S&P 500 dived 20.6%. Similarly, at the beginning of COVID-19, when fear, uncertainty, and doubt (FUD) were through the roof, gold saw a seven percent rise while stock markets all over the world plunged. Even after the ease of lockdown and vaccine development, the gold price stays high.
Take a look at why the gold price is still relevant after the development of the COVID-19 vaccine:
Initial Impact on Prices
Around the start of 2020, the pandemic’s impacts were visible in the commodity market, as the majority of commodities, including copper, palladium, platinum, and other precious metals, experienced a dramatic drop in prices over the initial three months. On the other hand, gold was one of the safest metals investments, kept its value, and even increased by five percent during the economic turmoil.
When other investments decline, gold is a smart option since it’s both exchangeable and convertible compared to fiat currency.
However, after the development of the COVID-19 vaccine in mid-2020, countries were trying to repair the economic damage; the only asset that didn’t decline was yellow metal. It stayed stagnant at first and gradually; the price increased due to its rarity.
Many experts believe that even after the availability of vaccines, the value of gold will go higher, as the pandemic shows no signs of slowing down. US Mint sales data reveals that sales for Gold American Eagle bullion coins were up by 465% in April 2020, compared to sales for April of last year.
However, the high demand for gold also means a shorter supply of gold in the market. The US Mint announced that it was temporarily shutting down its West Point bullion production facility due to the dangers of the COVID-19 virus even after the availability of vaccines. This increased gold’s value two times.
Falling US dollar
The US economy is undergoing a difficult period. The dollar has been falling uncontrollably, and economists believe it is due to the US Federal Reserve’s ineffective monetary policies and uncertain economic prospects. Experts estimate that dollar costs will continue to fall when interest rates approach zero in early 2021. While this is bad news for the country’s overall financial situation, the rising gold rates are good news for investors.
Pandemic and gold
The year 2020 has caught everyone off guard. Who’d have guessed a lab mishap could cause a global pandemic? And even after the lockdown was lifted, gold proved to be a reliable inflation hedge. If you look at the price of gold this year, you’ll notice that it was one thousand fifteen hundred US dollars per ounce in January and now sits at one thousand and nineteen hundred US dollars after a tremendous gain over the last ten months.
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