There was uncertainty in the economy during the period of crisis. Still, gold and silver coins witnessed a record high in their sales. In 2020, when stock markets were recovering from the pandemic caused by coronavirus, gold and silver made their comeback. By the end of 2020, the prices of gold increased by 25%. Gold is the world’s oldest safe asset that always thrives in times of uncertainty.
How does the Gold market work?
Let us understand the gold market first. It is divided into two: The first one is the physical market that comprises miners, jewellers, refiners, electronic manufacturers, central banks, banks and investors. Here the focal point is London that oversees the market. The second market is known as the futures market, which is for swapping contracts based on gold. It is an electronic market hosted by New York’s Comex exchange. Most gold produced today in the United States comes from the mines in the state of Nevada.
Impact of Pandemic on Gold
The prices of pure gold are quoted by the troy ounce and bullion trades in batches of 400-ounce bars. In the financial market, buyers and sellers agree to swap 100 troy ounces. The financial markets or futures are the standardized contracts that lock in gold prices. Investors are buying lots of gold because, according to them, it will hold its value if stocks fall again. Last year the silver prices also rose sharply as they were more than 6% to $24.36 per ounce, which is the highest since September 2013. The main reason behind the record high sales of gold and silver was that investors were preparing themselves for a possible rise in inflation due to trillions of dollars of stimulus from the government and central banks worldwide.
The investors in physical gold products do not get any return on their investment, unlike shares and bonds. There are no interest rates and no protection against inflation. The value either rises or falls on investor demand. Among other reasons, the drop in the dollar value was another factor that boosted the gold price. Since September 2018, the dollar index, which measures its value against a range of currencies, has fallen to its lowest level in 2020.
Conclusion
Gold is a commodity and a currency. The demand for gold has been held up by safe-haven buying and global policy support. According to Market Intelligence’s Metals and Mining research team: “The mine production will rebound over the coming years as higher prices and mergers between major mining companies support supply.” Some economists even said that Covid-19 was the best crisis for gold and silver. As the interest rate decisions do not impact the value of gold and silver, this precious metal serves as insurance against adverse economic events. Investors pile their funds into gold which drives its price due to increased demand. Amid the pandemic, the growth of various economies remained slow. Coupled with the US-China trade war and the tensions between the US and Iran, it resulted in a spike in safe-haven investment in gold.
If you seek to invest in gold and silver, RPS gold is a reputable dealer that sells and buys authentic 22 kt gold coins and bars. If you are considering investing in gold or silver now, you can even buy from us online.
