Gold has always had a perception as being a safe haven during crisis. Whilst there is truth with this, the crash of 2008/9 led to the biggest fall in gold price in living memory, dropping from record levels very quickly. People couldn’t sell their gold fast enough. With all things there is another side to the coin. The stock market crash was a systemic failure of the markets resulting in large quantities of gold being sold off to raise capital on an industrial scale. This drove the price of gold down very quickly.
What we are seeing today is in fact the opposite. There is no systemic problem with the markets, the crash we are experiencing now is due to outside influences. It doesn’t take a genius to guess this outside influence, it is of course the Corona virus. When the world went into lockdown the cogs of the worlds economy effectively stopped turning. However not a lot is needed to get these cogs turning again and since the wider population have gone back to work, markets and the economy are beginning to recover.
At the moment because of the larger industries not needing to sell off their gold, the old truth of gold being a safe haven during a crisis is becoming apparent. The price is at record levels with a 10% rise over the past three months and a 25% rise in the last year. Although the big question is whether or not this will last. No one can answer this with any conviction as no one actually knows. What is clear however is that people are returning to some normality and with normality tends to bring a stabilising of the markets, which in turn means people will go back to buying stocks and shares and property etc. Could this mean the end of the soaring gold price? Only you can answer this one. Are you bullish or bearish?