A Year Has Passed since Lockdowns Started Worldwide; Let’s Evaluate the Situation

in #lockdown4 months ago

It’s been over a year since the pandemic began. For a while, financial markets tried to ignore it – and then prices collapsed in almost all asset groups. Business activity across the globe came to a halt, too. Enterprises, transport, and social life stopped, whereas the tourism industry was virtually annihilated.

Then, after a period of recovery, stocks, bonds, and real estate prices suddenly skyrocketed to reach highs that hadn’t been seen before the corona crisis. Stocks kept reaching new all-time highs, while gold, too, went through a lucky streak: after an initial tumble, it grew by 40% over four months.

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Many investors and analysts thought that gold was finally on its way to a new ATH, but then things suddenly changed. While the stock and real estate rallies continued, gold entered a 7-month bearish period, falling to a pre-pandemic low. From the peak value of $2,070 on August 6, 2020, the price went down $400, reaching $1,683 on March 8, 2021. For comparison, on March 9, 2020 one ounce of gold traded for $1,680.

Even after three major aid packages in the US, unbridled printing of new money by the Fed, and increased inflation risks, gold grew by only $3 in the 12 months between March 9, 2020 and March 8, 2021.

The market sentiment isn’t particularly optimistic right now as the price trend is still downward, but better days are on the way. This is the opinion of Ian Ball, CEO of Abitibi Royalties.

He says that gold has a lot of fundamentals going for it – first and foremost, we have the growing mass of unbacked money. It’s worth reminding that 20% of all the US dollars in the world were generated in 2020, and that’s definitely a supporting factor for gold. Considering the amount of USD in the global economy right now, one ounce of gold should be worth between $1,900 and $2,400. However, there are also fundamentals that prevent it from growing to this level, including the rising price of Bitcoin (which draws away some of the investors and capital) and the strengthening of the US dollar.

Ball thinks that gold can find solid support between $1,600 and $1,700 and that the current downtrend can’t last for long. Before the end of 2021, investors can expect a price increase.

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