Gold Under Pressure As Virus Fears Weigh
The COVID-19 crisis was a nightmare for economies worldwide and everyone got touched. Considering the stock market and the commodity market, the impact was severe. Investors switched their portfolios upside down amid the same.
And when it comes to safe-haven commodities, gold tops the list without any doubt. At the beginning of the virus spread, gold saw a massive jump. Most people took the route to safe-haven to keep their money safe from market fluctuation.
Amid this, the gold prices saw a surge in the international market and it got beginners' attention. But, if we look at the current scenario, gold under pressure as virus fears are growing across the world.
In this article, we will have a look at the complete scenario of gold and check why gold under pressure due to the virus.
Past year performance:
If we look at the past year's performance of gold (beginning of 2020), the surge was around 28%. And, by September 2020, the price of gold was around USD 1950/ounce. It took a jump from the levels of USD 1520 at the 2020 beginning.
The past year was profitable for this safe investment but the prices will go for a correction very soon. Many experts believe that gold under pressure as it is losing its momentum at a slow pace and it will hit a correction.
Near future prediction amid virus
Less inflow in 2021
In August, gold had a good inflow for the ninth continuous-time and it helped in the price surge. In August 2020, the cost of this yellow metal touched a new record in the market. At that time, gold touched the attractive price of USD $2,067.15/oz. It was a perfect low-risk asset for investors and casual retail investors.
To be precise, the inflow was around 39 tonnes in August, but it was lower than that of July which was 166 tonnes. In July the demand for this precious metal was high. But as we touched the eighth month of 2020, many counties cut the demand. Europe was among the leading counties to cut down on gold imports.
But in 2021, the situation is different and the demand for gold is also different. The inflow is there in the market but the signals are weak. Amid uncertainty due to the virus and geopolitical issues, gold will struggle in 2021.
Higher inflation amid virus
Another major reason why gold will struggle in 2021 and beyond because of the high inflation. There is no doubt that gold is still a profitable investment, but it's behind many other assets.
Amid the COVID-19, many-core sectors will struggle to get back on track and it will affect gold. Real estate will suffer for a couple of months now, and due to inflation, people seek better options.
As the gold will undergo various price corrections this year, the journey is tough. As of now, the market is performing well to a limited extent and that is the reason behind the gold price decline.
Dollar Index Rally
Along with the virus growth, another reason behind the fall in gold is the stronger dollar index. As of now, the dollar index is on a rally and this is making gold prices weak. With more stimulus packages coming from the government, gold is losing its momentum.
With more financial support coming to the economy, it will boost the stock markets. And, when the stock market will perform in a bullish way, the gold prices will reduce.
The dollar is getting more stable after the COVID-19 recovery and it will impact gold in a direct way. So, the pressure will increase on gold in the upcoming time.
Stimulus Impact on Gold
As the government is pumping the economy with more liquidity, the gold prices are going down. It is because the stimulus packages will boost the important sectors in excess. Investors will show low interest in Gold as it has a lower return as compared to others. You will need solid gold trading strategies to make higher profits.
The President of the USA has further planned to introduce the stimulus to the economy and uplift it. So, the year 2021 will not be that great when it comes to investing more in precious metals.
Impact of vaccination
The major reason why gold feels the pressure is ongoing vaccination trials. The trials have started in every country in the world and it will reduce the impact of the virus in the future.
Hundreds of thousands of people are taking the vaccination doses to reduce the virus. So, with such a ratio of vaccination worldwide, the demand for gold will go backstep. For investing in gold, you can make certain adjustments.
Instead of very high volatile stocks, gold could be the perfect alternative for you. Gold will give you stable income returns and will not end up in loss. Depending on the country also, the factor changes for gold and the stock market.
The average return will reduce
As per many market experts, the average return on gold will reduce in the upcoming time. With the more normalization of vaccination in the upcoming time, Gold will face a hit. As of now, the average price of gold across the globe is around USD 1900.
But in the upcoming time, when the economy will get stable, people are going to seek better options. As the inflation rate is going up day by day, gold is not enough to fight it alone. Everyone seeks a more secure and fast-returning commodity.
Stocks of tech companies, especially FAANG will rise and they will pump the market. Companies like Netflix and Amazon are performing well even in this tough station and this is a sign of gold cut. With faster return and a short holding period, stocks will outperform gold.
Summary: Gold Under Pressure
Gold is an excellent trading commodity for investment but the COVID-19 has a severe impact on it. With the vaccination is getting into more hands and economies are pumping, gold is on the back seat. So whether you are a beginner or an expert, you need to know the stations.
Invest in a smart way in the market and know what can bring high profits to your portfolio. With higher vaccinations and stimulus in the market, gold's way towards a rally is tough. Gold will get a price correction in 2021 and we will also notice a boost in the stock market.
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