As history proves, when we have a world crisis, gold shines through! The cycle for gold over the decades shows several factors that influence the price, including periods of deflation, expansion, recession, and world crises. We know the ending period of a recession, for example, is when gold prices skyrocket; thus, the best time to hedge with gold is usually right before a recession recovery.
With the current worldwide economic devastation attributed to the COVID-19 (Coronavirus) breakout in December 2019, you, as investors and family providers alike, are taking time to reflect on many important matters. This reflection might include a re-evaluation of the insurance strategy you have for your investments. You may be asking some key questions:
- Is my investment portfolio one that gives me peace of mind during such a crisis as this (one like I’ve never experienced in a lifetime)?
- Am I investing in smart money?
- What can I do to hedge against the inflation that is certain to come after the pandemic recovery?
- What other investment options do I have?
Why Buy Gold Now?
While gold prices have been slowly but steadily rising since early 2019, since the outbreak of the COVID-19 pandemic, gold has already shown a sudden increase. So, why buy gold now? The price of gold per ounce on December 31, 2019, was $1,519.50. In April 13, 2020, only a few months later, the gold price per ounce is $1,737. With the knowledge that gold will continue to rise during the pandemic recovery period that is expected to go on for several months (if not longer), investors must buy before the price of gold rises. The trend for gold post-crisis is to spike. Because we are likely due for an extended pandemic recovery period, buying gold now is a smart decision.
In an article posted by The Balance, entitled Should I Buy Gold, Kimberly Amadeo states, “The main reason why people buy gold is to preserve their money during an economic crisis. Gold is the best hedge against a potential stock market crash…” While there is a great deal of uncertainty about the recovery of this worldwide pandemic, we can anticipate more hardships as we try to re-open businesses, get people back to work, and recover from the financial pileup over the trillions of dollars spent on US stimulus packages. The repercussions are unknown, but they will be substantial.
Gold Availability
It is a time of caution given the unknowns as we begin a health and economic recovery from the pandemic, but there are many “knowns” to consider. We know for sure that the price of gold is up. We also know that there may be backlogs on orders for gold! While most precious metals are plentiful, the time to market and into your hands is delayed, given the state of the world. Gold availability is another driver for investors who believe now is the right time to take advantage of the price of gold. We also know that while the price has not yet skyrocketed, many financiers are taking this opportunity to place their orders.
In many cases, there are delays because of a backlog of orders at a time when many companies are out of business. In a Los Angeles Times article, gold faces historic squeeze with coronavirus threatening a shortage, the author states, “At issue is whether there will be enough gold available in New York to deliver against futures contracts traded on the CME Group in New York with metals refiners shutting down and efforts to contain the virus halting planes.” You see, based on this world crisis, there is more than one factor contributing to the availability of gold and the demand.
Bringing Back The Gold Standard
President Trump and a number of his advisors have over the past year made some comments about returning to The Gold Standard—the monetary system in which the country’s currency is linked to gold; a fixed price is set at which to buy and sell gold in order to determine currency value. You may recall Nixon discontinued The Gold Standard in 1971. President Trump, who is said to love gold (who does not), is quoted as saying, “Bringing back the gold standard would be very hard to do, but boy, would it be wonderful. We’d have a standard on which to base our money.” While it’s controversial, the idea may also encourage buyers, which may, in turn, drive up the price.
Whether with gold, silver, or another precious metal, there is no doubt that this is the time to re-evaluate your financial portfolio. The markets have been walloped in the past few months (after record numbers), but the recent crisis makes it a good time to diversify in a hedge with gold. Forbes Contributor, Naeem Aslam, in an article entitled Why You Should Buy Gold Now, states, “After all, the economic weakness isn’t fully baked into economic data, let alone in earnings. Thus, there is no better time to buy gold.”
