Gold has long been viewed as a safe haven asset, a tried and tested asset, a secure place for investors to put their money when other investments are volatile and a way of hedging against falls in stocks or currencies.
As concerns continue to grow over the global economy, with several countries experiencing and expecting subsequent waves of the pandemic, the price of gold has climbed to a record high – overtaking its previous record from the financial crisis in September 2011.
“The rush to buy gold is driven by fear among investors due to the pandemic and the weakening global economy. Gold is often seen as insurance, its finite nature makes it a better store of value at times of uncertainty. Expectations for a lengthy economic recovery and lasting damage due to coronavirus is making the case for buying gold even stronger,” says James Turner, Director at Company Formation Specialists, Turner Little.
With interest rates near zero, gold becomes an attractive medium to have without having to worry about interest rates, as the price of gold rises as uncertainty in the markets rise. Supply constraints could also potentially drive prices higher, as demand soars.
“The current surge in price comes at a time when governments are trying to bring about a post-pandemic recovery, but there are still concerns over the long-term economic downturn, which has investors worried. But it’s important to remember that gold is still a volatile asset and doesn’t come with any guarantees. But when interest rates are low, gold does tend to prosper. It’s an important tool, but it needs to be properly managed,” adds James.
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