a stack of shiny gold Bullions with their branding on it

Gold is a pro-cyclical and counter-cyclical investment that most investors gravitate towards because of the increasing value and financial security it offers. In fact, it’s the ultimate safe-haven asset.

While gold’s price performance tends to fluctuate heavily for medium and short terms due to investment trends in the market, there are various long-term price implications.

The central bank demand, supply dynamics, consumer demand, are long-term savings are all factors that drive gold prices high.

As a reliable portfolio diversifier and a hedge against deflation and inflation, gold provided financial cover during the economic instability of 2020.

In fact, its increased demand among investors led the gold price to hit an all-time high in early August 2020, surpassing $2,075 per troy ounce.

Being aware of the factors and circumstances that escalate gold prices is critical for determining when and how to invest in gold.

Here are some recent events that influenced gold’s price escalation. 

More Countries Bolstering their Gold Reserves

Many countries’ central banks have been resorting to gold investments for the past few years.

In fact, Bloomberg indicates the countries like Russia, Afghanistan, and Turkey invested in a total of 651 tonnes of gold in 2018. 

Despite holding a larger portion of paper currencies, central banks continue diversifying their country’s monetary resources by converting cash into gold, primarily due to the currency value fluctuations.

Many global central banks today solely comprise gold reserves. An excessive gold accumulation due to rising government demands typically increases gold prices.

A Weak US Dollar Value

The US dollar denominates precious metals, including gold and silver. As a result, gold’s price rises with the US dollar’s devaluation.

A stronger dollar value is essential for stabilizing the gold prices and keeping them lower and well-controlled.

However, the U.S. currency reached its lowest level in 27 months during 2020, devaluing by 11% since its early 2020 peak.

Consequently, the combination of a weaker dollar value and rising gold demand drove the gold prices higher.

A devalued dollar is also an indicator of inflation. Therefore, more investors buy gold and silver bullion as a part of their self-directed IRAs as a force against the consequences of inflation.

Pandemic-Induced Economic Downturn

The COVID-19 pandemic was a public health crisis with severe economic downturns, which led investors to resort to gold and silver bullion, stocks, and ETFs for instant wealth protection during the economic uncertainty.

This event was similar to the circumstances during the 2008 Great Recession. Investors gravitated towards gold investment during these turbulent times.

As a result, the increased demand along with excessive government stimulus expenses skyrocketed the gold prices.

Increased Industrial Demand for Gold

According to the World Gold Council, the Indian, Chinese, and the American government have the highest demand for gold today.

In fact, India uses approximately 4,400 tonnes of gold to make jewelry. 

Furthermore, these countries also require gold for producing consumer goods for technological, medical, and industrial uses. When gold becomes a source of basic utility, its price escalates.

2021 is the perfect year to diversify your portfolio by investing in gold and silver bullion or making a precious metals IRA account. Connect with the experts at Orion Metal Exchange to guarantee your success as an investor by securing your financial assets today!