29 Jul Gold Will Reach USD 2,000 / ozt This Year
As we recently witnessed gold price break through its all-time high from 2011 and we begin the second half of 2020, the effects of the COVID-19 pandemic continue to resonate through every economy around the world. Stock prices are struggling to recover, and fiat currencies are losing value. Investors are reeling as they try to protect their assets from significant losses. There is, nevertheless, one asset that has not only been holding strong but has been gaining great value through this dire time. That is gold.
We, at J. Rotbart & Co. are confident that gold will continue to play its historically vital role as a safe haven investment during this global turmoil and the global economic aftershocks that will follow this crisis.
Gold investments are safe from COVID havoc
We continue to see the negative economic impact the pandemic has as the global community attempts to contain and fight COVID-19. Millions have been infected, and the death toll rises every day. Lockdowns and travel restrictions slowed and even halted many industry sectors with employees being furloughed, laid off, or facing pay cuts. The IMF continues to shift its global growth projections for 2020 downward, from -3% in April 2020 to -4.9% in June 2020.
In the face of this growing uncertainty, gold stands out as a reliable and safe investment to protect your wealth. Governments are attempting to boost their economies through quantitative easing policies which flood markets with their currencies. This may help in the short term, but investors will see the value of their currency and fixed income holdings dwindle. In the meantime, gold’s value has increased substantially throughout the crisis (see chart below) and recently topped its all-time high set in 2011.
Investors continue to purchase gold as a safe haven, which in turn increases its value as they lose confidence in other, more volatile investments. As the IMF projections above indicate a similarly volatile recovery, gold will continue to be in demand. So, we see gold prices having much more room to increase.
Most major assets lose value in the face of unemployment and all the instability that follows. The high unemployment causes less spending and less investment as people want to have access to cash for day-to-day expenses. However, having gold in one’s portfolio allows the holder a great extent of liquidity and allows quicker access to funds than with other asset classes. Compared against most major indices, gold has outperformed them, by leaps and bounds in many cases:
Gold will remain strong well after COVID
And if we look at how well gold has fared for investors in the past (see chart below), we see a strong future for gold in your portfolio. Through recent economic upheavals, including the global financial crisis, the recent (and ongoing) US-China trade war, and now the COVID-19 pandemic, we see gold offering investors a safe shelter as the economy struggles to recover in the future, as the IMF forecasts for 2021 have been adjust to 6.5% lower than predictions before the pandemic hit.
As the world now understands that COVID-19 and its effects (both health-wise and financially) are far from over and that entire industries, such as the tourism, food & beverage, and aviation, will feel its effects long into 2021. The realization that the world won’t go back to “normal” and the recovery will be long and complicated is causing greater uncertainty, which in turn, continues to move investors from “riskier” assets to a stable and reliable asset in times of crisis.
Most investment experts suggest having at least 10% of your portfolio allocated to gold; some suggest even higher percentages. In recent years, gold became even more attractive as interest rates remained low or were cut further so that other stable assets, such as fixed income or bond instruments, offered extremely low, and in some cases, negative yields. As governments look to boost their economies through and after COVID, these interest rates will most likely remain low so that even low-risk bonds offer negative interest yields.
Instead of risky investments in volatile stock and currency markets that are suffering from the US trade war with China, investors have been looking to gold. And as every country is looking to protect their economies, new geopolitical tensions are rising between China, Australia, Canada, and the UK, just to name a few major players. These are all tensions that will need to be resolved once the pandemic is over, which adds to the global uncertainty. Even central banks, in charge of national monetary policy, plan on acquiring more gold to bolster their fiat currencies and economies.
Even in the longer term, gold should be a fundamental part of every well-balanced portfolio. It is an ideal investment during a crisis, such as we are facing now, and it is also a steadfast asset that deserves its standing as a valued asset. The following chart illustrates how gold stands the test of time against other major asset classes. It demonstrates how every investor should include gold as part of their asset allocation when developing their investment strategy.
J. Rotbart & Co. fulfills all your precious metals needs
J. Rotbart & Co. is a family-run boutique precious metals firm that has extensive experience in all aspects of gold and precious metals investment. In this difficult time, you can rely on our expertise to assist you in buying, selling, transporting, storing, and even financing your precious metals investment. Whether you are a keen investor already or are starting out and need a guiding hand, let J. Rotbart & Co. provide the advice and services for all your precious metals needs.