What impacts the price of gold?

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A glance at the year to date price chart shows that gold prices have risen sharply. The usual suspects caused the 30% increase posted at the end of August 2020:

  • A weakening US dollar – With 2020 an election year, the trade war with China has continued to rumble on
  • Broader market uncertainty – The COVID-19 situation still has too many ‘unknowns’ in play
  • US Presidential election – a classic example of an event that makes markets jittery and makes the safety of gold more attractive for investors
  • Inflation is on the way – Central banks are pumping liquidity into the financial markets
  • Unemployment – A politically sensitive issue that encourages government spending

The price move, as exemplified in the gold price chart above, reflects the fact that some investors are buying gold in line with its traditional role as a risk diversifier.

The rapid rate of change and the price volatility is because others are spotting the trend and speculating on it.

Both groups are applying the same reasoning, just for different purposes.

A quick scan of market news agencies reveals that a lot of commentators think that now might be the time to go long on gold.

  • ‘Why Gold Is The Best Investment In The World Today’ (Forbes)
  • ‘Gold rebounds over 2% on robust sentiment, dollar weakness’ (Reuters)
  • ‘The currency of last resort’: Goldman says it’s time to buy gold as fear spreads across global markets’ (Business Insider)
  • ‘Gold to Reach $3,000–50% Above Its Record, Bank of America Says’ (Bloomberg)

Reprinted from eTorothe copyright all reserved by the original author.

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