The coronavirus has bought the world’s economy to its knees. As everything else seems to have failed, the precious metal market seems to be thriving. Market watchers have looked on as the prices surged to unprecedented highs since March 2020. This is not the only factor that had contributed to the rise in the previous metal prices but other global risks have added to the entire situation.
Gold and silver are scarce commodities and they has been getting scarcer in recent times however the global lockdown only speeded things that came to pass. Over the past decade a lot of countries seem to have been on a gold buying spree, as if they were preparing for some disaster. Maybe it was a matter of prudence or a sign that a lot of countries are serious about diversifying from the dollar. It’s no secret that countries like China and Russia have been trying to break away from the U.S dollar and the America’s dominance of the global financial system.
The potential of the virus staying with us until 2021 as well as the weak economic news that are coming out of major global markets like the U.S raise more uncertainties of a quick recovery which has made safe-haven assets like gold more attractive.
The resulting rise in unemployment and the loss of economic opportunities has led people to think about the gold or silver they own to keep the cash flowing so they can feed their families and get by until things get better. It is important to stay liquid and gold buyers can help make that possible. Even as the lockdown eases across the world and there is talk of vaccines, the future is still murky. Certain sections of the economy will take year to recover, if they ever do.
No one thought gold would reach $2,000 or that silver would reach up to $29 an oz. There was general excitement at $1,700 and for a few weeks it felt like it would deadlock there but then it shot up. As of the 12 September the spot price of gold is $1,934 an ounce and $27an oz for silver. It has dipped down but seems to have settled above $1,900. There is a general problem with supply but gold dealers have increased their efforts to get more people to sell silver bullion.
Gold does well in times of high inflation or deflation. If the re global economies reopen and the economic recovery in the UK, China and Europe this year, there will be inflation, bond markets will be crushed and gold will do well. However, if the economy remains muted, there will be more printing of money and debasement of the dollar which will be good for gold too. Silver will also recover once manufacturing resumes as its also used for industrial purposes.
As central banks launch monetary stimulus to reduce bond yields, they raise the risk of inflation which will devalue currencies and other assets. Things are still set to be more interesting in the coming months and all indicators show it might be the right time sell silver bullion due to the hard run its had, once the price settled you can always buy more silver.