Investing in Precious Metals: 2020 Vs. 2021
2020 has been an exciting year for the gold and silver markets. Both precious metals’ prices rallied impressively from being as low as $1450.90 and $11.74 per ounce to an all-time high across all asset classes.
Here’s a quick analysis of gold and silver’s price performance in 2020 and how 2021 could be a good year for purchasing precious metals.
Gold in 2020
Gold moved to a record high in early August 2020 by reaching $2,063 per ounce.
The economic instability and inflation due to the pandemic-induced lockdowns played an integral role in the skyrocketing precious metal prices.
Silver in 2020
Silver, on the other hand, had been on a low since 2009 due to being a volatile precious metal.
However, August 2020 also saw the highest prices for silver since 2013, with a 155% growth rate. Silver peaked at $29.915 per ounce in March.
The Final Months of 2020
The end of 2020 was a weak era for precious metals, especially after the development of the COVID-19 vaccine by Pfizer and BioNTech.
The hopes for economic stability and the optimism induced by the vaccine’s efficacy dropped rapidly dropped gold and silver prices.
However, COVID-19’s second wave and variants may lead to risk-off conditions for gold and silver prices, making 2021 a golden year for their price escalation.
Why 2021 could be the Year of Precious Metals
Central Bank Liquidity
Central banks continue to respond to the pandemic’s impacts by offering short-term interest rates at zero percent. In fact, according to the Federal Reserve, Fed Funds are likely to remain at 0% until 2023.
Gold and silver will thrive in a low-interest atmosphere as more people choose these assets for investment capital.
US Government Stimulus
The US Treasury borrows excessive stimulus funds during a global financial crisis. In fact, the government loaned $3 trillion to curb the economic impacts of COVID-19.
The second COVID-19 wave is likely to cause the treasury to spend more on stimulus packages in the future.
The inflationary economic conditions and the increased purchasing power of investors due to stimulus packages will support the gold and silver prices.
Pandemic’s Economic Impact
COVID-19’s economic impact will outlive the virus itself, and the actions that government and central banks continue to take in response will continue to increase gold and silver prices.
The pandemic’s economic downturn might have a similar impact on precious metals as it did during the Great Recession of 2008.
Investing in gold and silver during periods of price weakness is the optimal approach for investors, especially when the odds are likely to be in favor of increasing future prices.
Connect with our consultants at Orion Metal Exchange to further learn about how you can hedge against economic downturns and historically retain precious metals’ value for financial stability. Get in touch with us today!