Gold - A highly sought commodity
Gold is a highly sought after commodity during this crisis and is seen as a safe haven. This week the price has been hovering around $ 1,720.00 per ounce and predictions are bullish.
People in general are risk adverse and with the future being so uncertain there is an unmistakable tendency primarily to trust time-tested assets. Gold currently offers precisely that feeling of security.
According to the German polling institute Forsa, Germans believe that over a period of three years gold has the best chances of being profitable. 71% said they thought gold is a sound financial investment.
In the US gold prices were on the rise after the Federal Reserve refused to change interest rates and hinted that there were going to be no rate hikes until earliest 2023.
One part of the Fed’s statement said that “The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation”.
This means that because of the decrease in consumer spending because of the pandemic and the diminished confidence in the economy, the general value of goods and currencies will remain low and the Fed is not about to raise interest rates until the market picks up.
The Corona virus and its economic consequences have prompted central banks and Countries to introduce economic measures to cushion its negative effects. This is where gold can showcase its advantages. It is seen as a commodity that serves as a firewall against inflation. Naturally there is always the possibility of short-term investors and gamblers hopping on board and interfering with the normal progression of the commodity, but by and large, even in uncertain times, gold remains the multi-faceted store of value it always has been.
Fund managers are predicting that gold could reach the $ 2.000 per ounce mark in the upcoming months as the global economies try to weather the recession storm that seems to be imminent. So while governments are likely to try to intervene and jump-start the economy over the next couple of years, gold may even rise well above the prospective $ 2.000.