The Gold Rally Continues, Powered by the Corona Crisis and Falling Production
The price of gold in euro has reached a new all-time high in mid-May, surpassing 1,600 euro an ounce. Gold has been setting new records outside of the eurozone, too – mostly in oil-dependent countries whose currencies have fallen relative to the dollar.
However, more real historical highs still lie ahead. Gold needs to advance by 7% more to reach an area without any more resistance levels. Various US banks predict a price between $2,000 and $3,000 by the end of 2020.
It's a known fact that an increase in gold prices signifies a weakening of fiat currencies. The world's leading countries continue printing massive amounts of money. Inflation rates aren't rising yet, because the population cannot spend all that money while in lockdown. But what is going to happen next? Investors realize that inflation will speed up sooner or later and are trying to protect their portfolios.
Considering the current global economic situation, one can be certain that the price of gold will reach new all-time highs relative to different currencies.
As the gold rally continues, investors tend to prefer purchasing physical gold. The US exchange COMEX has experienced a growth in the number of requests for physical gold deliveries. Traders want their gold to be shipped to them: that's the only way to be certain that you own your gold.
The analytics firm, S&P Global Market Intelligence, reports that the number of new gold-mining sites is falling all around the world. No major location has been discovered during the past 3 years, and only 25 new large deposits were discovered in the past decade.
“The lack of new discoveries is the result of exploration focusing on older discoveries and later-stage assets,” wrote S&P Global’s principal research analyst, Kevin Murphy. “While there are still plenty of gold assets to be developed, the lack of new major deposits being discovered means that the project pipeline is increasingly short of large, high-quality assets needed to replace ageing major gold mines.”
Only 25 new major gold discoveries were made in the past 10 years. Together, they account for 154.3m ounces, or only 7% of all the gold discovered since 1990. According to S&P Global, a total of 278 major deposits were discovered between 1990 and 2019, for a total of 2.19 billion oz.
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