Covid-19 has had a far-reaching effect on every aspect of the world. There is no industry that has escaped the impact on this unprecedented time in our history, including financial trading. For some markets, there is actually good news.
The World Gold Council is the name of the market development organization for the gold industry. Their job is to boost the demand for gold, as well as provide industry leadership by offering insights into the international gold markets and by helping people understand gold’s role in supporting the social and environmental needs of a community. Their outlook for gold markets is incredibly high, as gold has continuously outperformed all other assets so far in 2020. By the end of June, gold was not only trading at a level not seen since 2012, but also reaching record or near-record highs in all of the other major currencies. Many analysts have predicted that e price of gold will top $2,000 an ounce by September.
Because of Covid-19, investors have felt a strong need to reduce their risk when it comes to portfolios. This is a very common practice in times of uncertainty. Gold value has risen 30% since the beginning of the year when word about the virus first spread. Forecasters are constantly trying to predict recovery models, but in this case, that can be very difficult. Instead of a V-shaped or even U-shaped recovery, the recurring peaks of infection are creating more of a W-shaped recovery. This is actually good for gold because it can help diversify a portfolio, something investors seek to do more in uncertain times, and it eases equity volatility, working as a suitable substitute for bond exposure.
Another reason people buy gold is when they anticipate inflation. The government poured money into the market in March in order to keep things running smoothly, along with stimulus checks, PPP loans, and unemployment help. This, in turn, creates more government debt. A savvy investor knows that could potentially lead to higher inflation, meaning it’s wiser to keep our money in a safer format. The additional tensions with China mean that trading will be affected, so people turn to gold in order to stay safe.