The price of gold still has a long way to go

Anyone who is thinking of investing in any asset, in particular: gold will do well to find out as much as they can about the precious metal, more importantly to see how the price has changed throughout history and what was driving the highs or causing the lows over that time. There are financial analysts who believe that gold is on track to hitting $4,000 an ounce. Looking at where we are at the present moment this might sound like a stretch but in 2007-2009 the price of gold averaged $750. Ten years ago, gold at $2,000 was unfathomable but it reached that point, and people who’ve held on to their gold investments over a decade made a significant amount of money. 

Historically, the price of gold has reacted to the expansion of debt and inflation that federal reserve banks have to shoulder.  In the US, the Federal bank’s balance sheet ballooned over $3 trillion. This has largely been because of the response that government’s has offered in response to the global COVID-19 pandemic. This number will keep growing as government’s offer economic stimulus packages to help the country get through the devastation brought on by the virus. Throughout history, bad news has been linked to bullish response of the gold market. 

The last economic crisis to grip the globe was in 2008, but the latest crash is significantly different.

When the G20 global leaders met in 2008, they were pro-trade and pro-growth. Now, a lot of money is being printed as part of quantitative easing spurred on by the current pandemic. Here’s something to consider: When the long-serving President of the US Fed Reserve, Alan Greenspan left the bank’s balance sheet was around 6% of GDP but now it has risen to 33%.

The Fed’s intervention is unprecedented. All it can do is throw money at the problem but this makes things worse for the economy and does not help protect or increase the value of the US Dollar. This has become a big advantage for hard assets like gold. However, the Federal Reserve has done more than institute quantitative easing to maintain good interest rates but they also buy gold. If anything can stop the collapse of the US dollar the. There is no reason why the price of gold can’t reach $4,000. The worst is not over. The fact that vaccines are being rolled out and Donald Trump has been voted out of power, does not mean things are going to get better for the economy. There are new risks and issues threatening the global economy. There is still lots of deaths that are expected in 2021 due to the second wave, new variants and other health pandemics we do not know of yet. Price inflation is in out future and anyone who has been flirting with the idea of investing in gold should do so now. There never is a good time to buy gold bullion- ultimately, the decision should be driven by individual needs.