Is This a Good Time to Sell Your Gold?
In the beginning of August, 2020, gold was trading at $1968. This smashed the previous world record of $1920. With the future of the economy and stock market uncertain, it’s understandable that many investors would turn to precious metals like gold.
However, the question remains, how much further will gold go? Will the price begin to decline as the economy continues to strengthen? All of this depends on how the pandemic is managed and how governments, financial institutions, and central banks respond.
Demand
When the pandemic began, the economy collapsed almost overnight. The stock market crashed; unemployment numbers catapulted.
On the other hand, March 2020 was the best month for gold prices in 11 years. The last time it had hit such highs was after the 2008 financial crisis. With future economic conditions seeming so uncertain, the demand for gold and other precious metals had risen precipitously.
However, over the past few months, the stock market has rallied pretty well, and the economy seems to be on the upswing. Unemployment numbers have dropped to 8.4%, which while still high, are substantially better than March.
This indicated that demand is potentially about to drop as people get back to work and reinvest in stocks, and therefore the prices will fall.
Trade and Imports
However, on the other hand, the pandemic has caused significant disruptions in international trade and imports. According to statistics, there has been a 30% decline in global trade over the pandemic.
Furthermore, due to the pandemic, many firms aim to restrict international trade and movement in the long-term to sustain self-sufficiency.
This means that the supply of gold and other precious metals will decline. The lack of a steady gold supply will rapidly increase the prices since demand will always outstrip supply.
Furthermore, even if the demand decreases (as it has over the past couple of months), a lack of supply could be gold prices at historically high levels.
History
History shows us that people consider gold to be the most reliable form of investment. Therefore, in times of crisis, such as The Great Depression, World War II, and the 2008 recession, many people turned to gold.
The pandemic is still in full swing around the world, and the future still seems uncertain. This could mean that high gold prices are here to stay, at least for a while.
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