Times of crisis are times of gold, which is now also evident in the rapid price development of the yellow precious metal. Due to the ongoing panic, the gold price could now pick up speed again after a small reset.
• Central banks ensure rising prices
• New all-time high is possible
• Insurance instead of profit-making
The roller coaster-like gold price development made some precious metal fans a little skeptical in the past few weeks, because the crisis currency could not directly assert itself against the negative trend on the market.
Gold rally with misfire
As a result of the corona panic, the price of gold also plummeted. While the price of an ounce on March 8 still marked a new annual high of $ 1,697, a few days later the precious metal was only around $ 1,460 and thus lost around 14 percent within 10 days a. The gold market shock was short-lived, however, and many investors immediately used the interim low to buy, pushing the gold price back above the $ 1,600 mark.
The central banks drive prices up
The main reason for the gold rally, which caused the price per ounce to increase from around $ 750 to over $ 1,600 between 2009 and 2020, are the global central banks. After the major central banks tended to reduce their gold holdings in the 1990s, they have been taking decisive action again for some years now, driving prices for the precious metal.
In addition to the large acquisitions, the policies of these institutes also cause prices to rise. Because in times of zero and negative interest rates, it makes no difference for investors whether they invest their assets in gold or keep in cash as both alternatives do not generate interest or income. Accordingly, many investors now prefer to have a few small bars of the crisis currency gold instead of a large balance of fiat money in the account, which anyway brings no interest.
In addition, the new quantitative easing programs of the central banks, which are now to protect the global economy from a recession, are currently having a very positive effect on the gold price. “The endless QE and global programs that pump liquidity into the markets are positive for gold,” said Peter Spina, president of GoldSeek.com, to the shareholder. IG Group analyst David Iusow shares this assessment of the situation: “The Fed’s bond purchase program is driving investors again in gold,” as the DPA reported.
Is the way now clear for a new all-time high?
Since the central banks of the world’s largest economies are currently pumping tons of fresh capital into the markets to contain the economic consequences of the protective measures relating to the corona virus, it is now quite possible that the yellow precious metal will soon mark a new all-time high. Because the current measures of central bankers are many times more aggressive than in the financial crisis of 2008 and 2009. Even then, the large-scale QE programs of the central banks marked a turning point in the gold market.
Is it worth buying gold now?
Whether it is worthwhile for private investors to invest in gold depends on some very personal factors, regardless of the policies of the central banks. In principle, of course, there is nothing to be said against a manageable number of coins and bars in the in-house safe or in the bank safe deposit box. Because in times of crisis, the precious metal not only increases in value at best, but also always gives a feeling of security. Accordingly, the precious metal is particularly recommended for risk-averse or very security-oriented investors.
However, investors who are now investing in precious metals at maximum prices must be aware that, unlike buying a reliable dividend share, they can only achieve a return if somebody is again willing to pay a higher price for the piece of metal they bought To pay price.
Gold is insurance and not a source of return
Since the millennia-old intrinsic value of gold should also be retained in the future, it is nevertheless advisable to secure your own portfolio or assets to a certain extent with the coveted precious metal. However, investors who want to generate a good return over the long term should not set their gold share too high. Adjusted for inflation, the yellow metal has generated an average of less than one percent per year since 1900. Accordingly, gold is seen as insurance for times of crisis and not as a source of returns like stocks.
According to this fact, the most famous investor in the world is not a big fan of the yellow metal. “Gold is extracted from the ground – in Africa or elsewhere. Then it melts down, digs a new hole, buries it again, and pays people to guard that hole,” Warren Buffett told a group of students in 1998 Harvard University.
Pierre Bonnet / finanzen.ch
–
Image source: Lisa S. / Shutterstock, iStock / t_kimura, David Biagini / Shutterstock.com, Aleksan / Shutterstock.com
.
