In 2020, the price of gold had broken records: the health crisis linked to COVID-19 paralyzed international trade, causing stock prices to collapse and raising gold as a safe haven. At the height of the pandemic, gold reached an all-time high at €1,743 per ounce (August 2020). However, the current situation is more bitter: in a context of economic recovery inflated by massive support from central banks, gold is tarnishing under the pressure of the dollar.
After the summit, the fall
At the end of November 2020, the price of the precious metal had collapsed, impacted by the announcement of the discovery of a vaccine and the gradual recovery of the major world economies, again offering investors a taste for risk. Because gold is above all a safe haven: its operation in opposition to the stock markets allows it to flourish in times of financial crisis, when stock returns are at their lowest.
However, gold’s fall at the end of 2020 was punctuated by a few rebounds, especially in mid-January. However, each upward trend was followed by a new downward correction, particularly in March 2021 when the price fell due to the rise in interest rates in the United States. Investors, therefore, turned away from gold, despite the inflationary suspicions generated by the massive injections of liquidity into the American economy. The devaluation of the dollar is generally profitable for the price of gold, but the scenario of hyperinflation in the USA, envisaged by analysts at the start of the year, seems to be better controlled than expected.
Gold in Crisis?
Currently, gold prices are still trading lower, this time due to the US jobs report released last week, indicating a better-than-expected economic recovery. Despite rapid price increases at the end of July, due to a temporary depreciation of the greenback, gold held up without performing. The doubts of certain specialists as to the monetary policy of the USA were not enough to revive the price of the precious metal: gold is paying the price for a potential rise in interest rates, anticipated by investors. The strength of the dollar generates a weakness of the yellow metal, which is closely linked to the fluctuations of the American currency on the international market.
A long-Term Investment
While the pandemic has had a heavy impact on trade in 2020, the global economy seems on track to recover to its pre-covid cruising speed. In Asia, the world’s second-largest gold trading hub, experts report ” very quiet trading across the entire precious complex .” In this context of recovery, critics of gold prefer risky investments that are more profitable in the short term.
The fact remains that since August 2001, gold has gone from $265 an ounce to more than $1,735 in August 2021… That is a 550% increase in the space of 20 years! Gold should therefore not be seen as an investment similar to stocks and bonds, but as a long-term investment, capable of withstanding large-scale economic crises such as the one we experienced in 2020. Because for an investment carried out in 2001, we will ultimately retain only the capital gain realized 20 years later, omitting the shifts and dizziness of the gold curves.
