Why Is Gold So Bullish?
The price of gold has been surging this year. Currently hovering at a nine-year high of around $1,870 per ounce, gold prices have soared 23% year-to-date and have climbed 30% since the COVID-19-fueled sell-off in March. The price of gold is expected to set a new record in the coming weeks as investors flock to safe haven assets amid the COVID-19 pandemic.
Gold prices continue to climb higher and are in striking distance of the all-time record of $1,920 per ounce reached in 2011. While most investors see precious metals like gold and silver as mainly a safe haven investment, there is more to the recent price movement than safe haven investing. Other factors impacting the rise of gold prices include low interest rates, the U.S. dollar, and one often overlooked factor, yield rates.
The spread of COVID-19 and geopolitical tensions between the world’s two biggest economies is buoying prices for assets like gold and government bonds. A lower return on bonds, the yield, makes gold and silver a more attractive investment as investors pin their hopes on the fact that precious metals will hold their value at a time when central banks flood the markets with trillions of dollars in stimulus packages.
Ten-year yields, which capture a better picture on economic growth because they strip out inflation, have been trending steadily lower, and are at their lowest level since 2012. What that tells us is that investors believe growth will be underwhelming for quite a while.
Nothing is forever, though. As the U.S. and global economy starts to recover, demand for assets like precious metals are expected to fall. But again, with interest rates pegged at near record lows and fears of a second wave of global COVID-19 cases, demand for gold and silver will remain strong for the foreseeable future. In fact, gold reaching $2,000 an ounce in the coming months is not out of the question.
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With COVID-19 infections soaring and U.S. economic data weak, it’s not a total surprise to see a growing number of investors piling into precious metals like gold and silver. In the midst of all the growing uncertainty, gold prices are expected to remain bullish and hit record highs in the coming weeks and months. While adding gold to a portfolio is an extremely popular option during periods of economic uncertainty, the trading professionals at Learn-To-Trade.com can show you other investments that go up when the markets go down.
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