Do You Trust Bloomberg?
According to Bloomberg, gold has become the top-performing asset of 2020, having gained another 15%. The overall price increase since January amounts to $250: an ounce of gold now costs $1,725.
Considering that we're only 5 months into the year, this result is really impressive. In 2019, the price grew by 25%, fueled by the US-China trade war and the quantitative easing policy pursued by the Fed.
In 2020, the rally continued, spurred on by the COVID-19 emergency. Gold is being quite predictable: it grows as other assets slump because of the crisis. Are there any other factors driving the rally?
Gold's ROI is fully determined by its price dynamics; it's a hedging asset used to preserve one's savings and capital. In the current world, where trillions of dollars and other currency units are created out of thin air by central banks, only gold manages to keep its value in the face of inflation. Gold's reliability as a means of storing value and as money is confirmed by three thousand years of human experience. Even in the times of Egyptian pharaohs, gold was admired for its beauty and utility.
From an investment point of view, gold remains the preferred safe-haven asset during periods of instability. It's in particular demand in times of economic crises. That's why the current pandemic crisis, which has triggered recessions all across the globe, has also pushed the gold prices upwards. This, in turn, led to a strong deficit of gold.
Gold ETF volumes have hit an all-time high, and speculative long positions in the futures market have been growing as well. The state mints in the US, Canada and Australia have all reported record sales of gold investment coins and bars.
As the Treasury yields keep falling and stock exchange indices are struggling to recover, negative interest rates are becoming a possibility in the US. In this scenario, the price of gold could cross the $1,800 mark as early as June.
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To the question in your title, my Magic 8-Ball says:
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If the currency volume is further inflated beyond any imagination by the centrak banks, as it has been done lately, there can only be one direction for gold and other hard assets - and that is up. This is somewhat diluted by the speculation with derivatives, but with every Hiob's message it makes a jump up. This is even more visible in gold prices other than the US$.
This confirms what "gold bugs" always say: gold is the real money. And silver, too. Actually, gold didn't go up 25% in value - the US$ has lost 25% of its value. Or probably more, we will know soon enough.
The Melt Value of Gold will be $35 per ounce and the Melt Value of Silver will be $3.50 per ounce...
People holding Gold and Silver all over the world will Gladly Sell it at those Melt Value Prices...
June 21, 2020... 14.6 Hollywood Time...