Gold prices have seen a major surge over the past few months, and for obvious reasons. The coronavirus pandemic has instilled a sense of fear and paranoia among many investors who believing that this lockdown will prove to be the tipping point that sets the U.S. economy into a long-awaiting recession. While many do agree that a major downturn is long-overdue, the markets have already recovered a fair bit since hitting earlier lows this year. As such, gold prices are now giving back a little of their previous gains but are still staying at a respectable level.
Prices for the precious metal settled at $1,735.60 on Wednesday, still up significantly from the $1,520 or gold was trading at the start of the year. However, over the past couple of months or so, prices have hovered around this price point, with gold struggled to breach past $1,750 as the global economy shows at least some sign of stabilizing. Other precious metals, like silver and palladium, are both up today mildly, just around half a percent.
“Traders and investors are weighing the bullish aspects of generally faster rebounds in world economies than many had expected versus the bearish element of a resurgence in Covid-19 reported cases in some regions of the globe, including some U.S. states,” said senior gold analyst Jim Wyckoff according to MarketWatch. “At present, it appears the global economic growth factor is winning out. [However], skeptics can argue the rally in world stock markets is mainly due to the floods of central-bank infused cash that have hit the global financial system.”
Gold prices are inversely correlated with the state of the general market as investors flock to precious metals as a way to store value. However, prices for precious metals tend to fall when the economy improves. One positive sign in the U.S. was the number of new homes being constructed in the country, which rose by 4.3% in comparison to last month. The data, which came from the U.S. Commerce Department, is a pretty big surge by housing standards.
However, there’s a fair bit of geopolitical news going around the world that can help prop up gold prices. For one, Indian and Chinese soldiers clashed in a border skirmish this week, where approximately 20 Indian soldiers ended up dying in the brief conflict. Additionally, North Korea supposedly blew up a liaison office that operated between the two Korea’s in the border town of Kaesong. Both issues have the potential of escalating into larger conflicts. If that happens, gold prices could very well see a significant surge.
There are still quite a few analysts who think that gold prices could now break $2,000. However, if gold failed to reach that point during the height of the coronavirus pandemic when fears were at their worst, its hard to see why prices would go up further unless a second wave of outbreaks happens to be significantly worse than the first. Regardless, gold investors have profited significantly from this COVID-19 outbreak, and there’s at least some chance that prices will continue to rise from this point onwards.