It is always worthwhile to keep an active eye on the current gold market situation. Looking at the current chart, it is evident that there are ample similarities with the 2008 financial crisis. For those with a long-term perspective, this is excellent news.
The Gold Price Stabilizes Again
These past few months have been very interesting as far as the gold price is concerned. For a market that is hardly subject to extensive volatility, there have been multiple opportunities to make very good money with little effort. The dip to the low $1,430 range has created an excellent buying opportunity for those still on the fence about precious metal investments.
Fast forward to today, and it is evident that the gold price has stabilized. Ever since surpassing $1,700 again, there has been far less negative market pressure to contend with. In fact,one could argue that the gold value is relatively stable, even though the entire world is still reeling from the coronavirus crisis.
Digix co-founder Shaun Djie is cautiously optimistic for the future. In his opinion, the current gold price momentum is similar to that during the financial crisis of 2008. One also has to keep in mind that global economic repercussions are likely to materialize once this crisis has come to an end, primarily due to the sheer amount of stimulus packages.
Djie expands on his cautious excitement by stating:
“We could very well see the same pattern in 2020 as gold prices are starting to stabilize due to the Federal Reserve System introducing new liquidity injection facilities—and recently hit its largest daily percentage surge in over a decade.”
This is in line with some recent gold price predictions for 2020 and beyond. Most targets focus on the $2,000 level. Bank of America analysts took things one step further by highlighting a potential surge to $3,000 per ounce by late 2021.
Wealth Protection Takes Center Stage
During times of financial uncertainty, it becomes crucial to protect one’s wealth. Sticking to the fiat currency system is not the best option in that regard. Fiat currency will result in lower purchasing power, effectively reducing one’s wealth if no action is undertaken.
Keeping that information in mind, it is only normal to see an increase in gold price. Both investors and onlookers are trying to protect their wealth at all costs. Based on previous cycles, gold and other precious metals often tend to gain popularity during uncertain times. That will also lead to short-term price fluctuations, but those always need to be taken in stride.
Gold is also a physical commodity, thus it cannot be printed in unlimited quantities like fiat currency. There is no such thing as a “gold printer”. Nor is the gold price subject to political decisions to address interest rates or currency supply circulation.
Djie acknowledges that gold is not as correlated with economic fluctuations and traditional markets. That is one of the core features of the world’s leading precious metal.
One downside is how it can never be used as “liquid” as cash, due to the metal being far more scarce. As such, fiat currencies, gold, and cryptocurrencies will always exist side-by-side. Their individual rate of adoption and real world use may look different in a few years from today, however.