As I predicted gold price has sky-rocketed past $2,000 mark. And no one knows how far more it can go. Since the time gold reached above $1,800 per ounce, I started hearing myself muttering, why didn’t I buy more?
But before you start your own gold rush by running to your nearby gold dealer to bet on some gold, take a step back to try to understand what is going on and what you should do now.
Disclaimer: I’m not a licensed or certified financial advisor so these are just my 2 cents.
That was the same question that haunted me when I first bought my shares of gold. I caught the gold bug around late 2018 and finally took the plunge in investing in this precious metal in early 2019. At that time, the price was still around $1,300 per ounce. Today, this has given me a return of 54% in just 1.5 years!
I’m glad I took the plunge. Because my inner self kept telling me then — buy it for the long run, not the short run.
I continued to invest more in gold in the third quarter of 2019. That seems to be the right move too.
During then, most of my loved ones and friends were skeptical about investing in gold. I hate to say this but I told you so.
So, if you just caught the gold fever, just buy enough for the rainy season. Don’t expect a fast return. This is my pessimistic voice saying. I’m not going to write on what my optimistic voice is saying 😉
Since the ancient Egyptian time, gold has been the precious metal that is most revered by mankind. Show a one-ounce gold coin to a 5-year old kid and see how they treat it. Its golden glitter is enough to tantalize anyone’s heart.
So, what things are down recently?
COVID-19 — It’s obvious to everyone that the economy has gone into a recession-like slump. Virtually every business in every corner of the world is somehow affected. There’s even a taboo in South Korea that customers should not be asking a business owner how their business is doing.
US economy shrank by 32.9% — The US economy lost a 32.9% annual rate between April and June this year.
US unemployment rate continues to grow — More than 1.4 million people filed new claims for unemployment for the fourth week of July, more than the previous week. There’s no sign of stopping. In total, 51 million Americans lost their jobs.
Source: USA Today
US dollar is declining — “The dollar is hanging by a thread,” said Mazen Issa, senior currency strategist at TD Securities in New York, according to Reuters.
Further tension between US and China — These two superpowers are inching closer to a cold war. Even an app was not spared. Trump administration is coercing China’s ByteDance to sell its US arm of its famous TikTok app to Microsoft. He even said the US Treasury should get a cut from the deal. Meanwhile, US and China warships and fighter jets are being deployed in the South China Sea.
No vaccine yet — Although the UK government has ordered 100 million doses of COVID-19 vaccines, there’s no indication when it will arrive. US Operation Warp Speed aims to deliver 300 million doses by January 2021 while Trump claims they will have before the end of the year. Russia is confident of producing them by September this year although they are only in phase 2 trials — two more trials to go to be approved.
Why gold price is up when things are down? People value gold as a stable and universally-desired commodity with little fluctuation in its price.
There’s a story of a Vietnamese family who was trying to flee to the US from Vietnam during the war. Their uncle knew no one would want Vietnamese currency (dong) in the US so he gathered an ounce of gold by melting jewelry that he could find and use that to help them settled down there.
Thus, gold is often used by investors to hedge against a declining market. So, when their investments in bonds and stocks are heading south, they sell them and buy gold instead.
The market price of gold is an indication of how people are reacting to market conditions. If you aim to invest in gold right now, now may or may not be the best time to buy because the price has ballooned to a point that is unprecedented. But if other things continue to decline, the price may sustain or grow further. The last peak was on July 25, 2011, at $1,838 per ounce and eventually descended to $1,613 on November 22 that same year.
The closest prediction we could make is we might have a COVID-19 vaccine by the end of this year, that’s months away. Still, it will take more months to reach every one of us. Until then, don’t be surprised if gold continues with its meteoric climb.