It’s been a profitable year for gold but experts believe we haven’t begun to scratch the surface. Here’s why the gold price will continue to soar.
With the pandemic crisis having now lasted throughout the majority of the year, and with no end in sight, the outlook for the US economy continues to look grim. Over 60 million Americans lost their jobs at some point due to Covid-19, and millions remain out of work. Thousands of companies have also shut their doors, and many more are barely hanging on by a thread.
The US economy shrank by nearly 33% in the second quarter of the year, and the V-shaped recovery that many had hoped for seems completely out of reach in the immediate future. Stock markets volatility spun out of control with an up-and-down rollercoaster effect fueled by trillions of dollars in Federal Reserve stimulus. Now with the uncertain possibility of more stimulus, investors are increasingly concerned.
The one notable bright spot for investors throughout the persistent health crisis has been the performance of precious metals, particularly gold and silver. Gold and silver, as demonstrated in previous crises, have once again become the safe havens for investor assets. Spot prices for both gold and silver have soared to record-breaking numbers and experts believe this is only the beginning as the metals are set for significant gains in the coming months and years.
The Story of Gold and The Pandemic
At the beginning of 2020, the gold price started around $1,500 an ounce and climbed to nearly $1,700 an ounce prior to the impact of the pandemic on the Chinese economy. Investors around the world took notice, however, once the coronavirus spread and began to impact Western countries, the metal spot price took a dip. Gold, however, didn’t perform nearly as poorly as stock markets. While the Dow Jones and S&P 500 lost about 35% of their value in March, gold’s decrease presented a huge opportunity for investors to get in on the lowered price. Gold not only quickly bounced back, but it went on to set a new record price over the summer, reaching $2,075 an ounce.
Silver performed similarly, dipping from around $18 an ounce to about $12 an ounce in March, before not only swiftly rebounding but more than doubling in price to over $28 an ounce in September. Experts strongly believe silver still has tremendous room to grow, as is significantly undervalued in relation to gold as well its demand in the market.
Though most analysts expected gold and silver prices to rise this year, precious metals have far exceeded expectations. Here are the main reasons why gold and silver prices have soared:
Precious Metals Are A Safe Haven
As economies went into lockdown due to the coronavirus, investors and markets saw the writing on the wall with many suddenly looking to boost their cash holdings to withstand the economic halt. This caused the immediate drop in both paper stocks and metals immediately selling their assets. Once investors were able to build up the cash stores, they opted for safe investments and secure assets. With stocks’ uncertain future of retail consumption in the age of coronavirus, gold and silver stood out as those safe and secure options for investors to hedge their portfolios. As demand grew for these metals, so did their prices.
An Uncertain Future
In these unprecedented times, no one could predict how long the lockdowns would last as well as their impact on the economy, unemployment, and the markets. In fact, there is still so much uncertainty as the economy is nowhere near where we hoped we’d be months after the start of the lockdowns. Schools is still mostly remote which means parents can’t physically attend their offices, which leads to an unorganized workflow for those working, reduced consumer spending, and a strong probability of ongoing recessions. With increasingly high corporate debt levels and doubts as to whether governments will effectively deal with the coronavirus moving forward, investors continue flocking to what they know and trust, and that is gold and silver.
The Dollar Decline
With the Federal Reserve monetizing the national debt, further increasing it by $3 trillion to combat the effects of the lockdowns, the future of the dollar is in question. Since the Federal Reserve has also stated its desire to further stimulate higher inflation, basically printing more money to keep asset prices elevated, savvy investors realize what this means for the value of the dollar, and are choosing to protect their wealth with gold and silver.
Adding Gold To Your Investment Portfolio
Structuring an investment portfolio is a personal choice that should be made with careful thought to risk factors and financial goals. Most investors opt to have a well-balanced portfolio with diverse assets that minimize risk while increasing profit potential. Gold and silver have stood the test of time through numerous market volatilities and recessions to have a proven track record of increasing especially in times of crisis, making them efficient and effective assets to ensure a safe retirement.
Ultimately, when you look at precious metals performance like that of gold over the years, you’ll notice it increased 500% in the past 20 years, 250% since the 2008 crash, and has doubled in just the last 5 years. This year alone it soared over 30% and is projected by numerous experts to continue rising over the coming months, especially after the election, and throughout the coming years.
Now that investors have multiple options of owning gold, whether physical minted coins or rolling over their retirement accounts, having a self-directed Gold IRA allows investors to maintain the same tax advantages they already enjoy with their traditional IRA or 401K, only to enable unlimited amounts of gold and silver to invest in. Having tangible products also enables more control over investments which is very appealing to investors, particularly in these uncertain times.