Last year was a bitter-sweet year for gold dealers as more people bought more gold as a safe-haven against a global economic decline. Inflation has gone high because of unending quantitative easing that is plunging countries in more debt. When countries went into lockdown because of Covid, entire industries had to shut down. This disturbed the gold supply chain. March and April were still the most popular months for gold but there just wasn’t enough of it to go around.
When mints like the U.S mints ran out of the popular American Eagle coins, premiums went up. In March 2020, the US Mint managed to sell over 150,000 ounces of gold eagles and more than 5,480,000 ounces of silver Eagle coins. The demand for Gold eagles went up again in August when the price of gold broke through the $2,000 an ounce mark.
It is expected that the demand for gold bullion will keep going up 2021; especially since governments are more likely to keep borrowing and printing more money to mitigate the impact of the global Corona virus pandemic.
The dollar has been weakening, import costs have been rising, inflation is at an all time high, supply still doesn’t meet demand and reserve banks have let inflation run high. This is all good for the price of gold. But is isn’t sustainable.
Gold and silver charted the best price since 2010. At the beginning of 2019, gold traded at $1520.90 and gained 24.5% to close at $1892.90.
COVID-19 affected every aspect of the gold market. It reduced mining and refining, fabrication, recycling, affected investment. It affected the buying, selling and transportation of gold around the world. The biggest dynamic effect has been on the investment front. More people will continue to buy gold bullion for investment purposes in 2021 than they did in 2020 and 2019. Despite the numerous market disruptions, gold still managed to gain 20%. Everyone agrees that this was largely because all the factors that push the price of gold were in play at the same time. It wasn’t just one thing, gold found itself in the perfect storm of rising inflation, rising debt, geopolitical risks from all the corners of the globe and a global pandemic.
We are not out of the woods yet. COVID-19 has weighed heavily on the precious metals market however, the roll out of vaccines isn’t going to turn things around overnight. Vaccines will certainly weigh on the ascent of gold as a safe haven ascent. The price of gold started to retreat when news of vaccines efficacies began to filter through around November. The price of gold dropped by as much as 6%.
Experts believe that the price of gold will drop further if the vaccine roll-out happens too fast. However, all this vaccine optimism might be a little premature especially with reports of new strains.
The first half of 2021 might be worse than anticipated, even with the vaccine being rolled out. We might still have to deal with gold bullion shortages again. The price of gold is expected to drop but this is expected to have a minimal effect considering the dreadful state the whole world is in.
The demand for gold underpins how gold has intrinsic value and how it is a good hedge against inflation. People were still buying gold even when the price seemed high because of the uncertain economic times we now live in. The motivation goes beyond making a profit, but because it is wise to buy gold bullion as a hedge when everything around you seems to be going up in flames.