The Rush to Gold and Other Precious Metals
Gold at an All-Time High
The ongoing COVID-19 pandemic has derailed the world economy. The economic downturn is evident in the falling stock prices, the devaluation of currencies, and dropping GDPs of almost all the nations. As the virus spread continues in the US, the US dollar has depreciated against other global currencies, and it has reached its lowest in the past 2.5 years. It has fallen 4.9% against the Euro, 2.5% against the Yen, and 4% against the New Zealand Dollar.
As a result, gold continues to outperform the S&P 500 index during the pandemic. It generated a total return of 61.1% compared to the S&P 500 return of 8.9% over the last 12 months. The price of gold recently spiked to over $2,000 per ounce.
Warren Buffet and Investment Funds
Any investment that gets the Buffett seal of approval becomes all the more attractive for the investors. So is the case with gold and gold stocks during the current pandemic. Despite being a critic of investing in gold bullion, Warren Buffet’s Berkshire Hathaway invested $560 million in Barrick Gold, causing the stock to gain more than 11%!
Warren Buffet closed investment in his position in Goldman Sachs completely, reduced his position in JPMorgan Chase by 61%, and sold its stakes in Wells Fargo and PNC to buy a stake in Barrick Gold. Buffett’s trust in gold investment translates to upcoming good days for gold-mining stocks as he is known to be the father of value investing and understands the stock market better than many others.
Factors Driving Both Gold and Silver
Due to the falling stock prices, dollar prices, and the associated uncertainties, investors are turning towards gold and other precious metals as their safe havens to create a balanced investment portfolio. Gold, silver, and other precious metals have always enjoyed the status of being dependable, reliable, and secure investments due to their real and conveyable values. They function as hedges against times of economic recession, currency devaluation, and high inflation.
Overall, gold, silver, and other precious metals are benefiting from the investors’ innate need to reduce their risks. Historically, whenever stocks, bonds, and property prices slump, the investments shift towards gold and precious metals as a protection against the risk of losses and uncertainty.
Different Ways to Invest in Precious Metals
There are several ways to invest in gold, silver, and other precious metals. Investors can either invest in actual precious metals in their physical form or purchase metals-backed investment products. The different methods of investing in physical metals include investing in physical bars or coins of gold and silver, termed as bullion, and gold and silver jewelry.
The other alternative for investing in precious metals is to invest in gold and other precious metals-backed investment products. The simplest method is to buy exchange-traded funds (ETFs) that invest in precious metals. ETFs are quite liquid and allow hassle-free buying and selling. The top gold ETFs in the UK are Invesco Physical Gold ETC, WisdomTree Physical Gold, and iShares Physical Gold ETC. The top gold ETFs in the US include SPDR Gold, Aberdeen Standard Physical Gold Shares ETF and Invesco DB Precious Metals Fund. Investors can also invest in precious metals futures contracts and benefit from the price movement.
Another method is to invest in the stocks of gold mining companies. The high value and fastest-growing gold stocks in the UK include Centamin, Polymetal International, Fresnillo, and Trans-Siberian Gold. These stocks gain from the rising price of gold and other precious metals and hold strong potential in the future.
Will Gold Continue to be Bullish?
The gold prices are at an all-time high during the ongoing coronavirus pandemic. The gold prices look bullish for the foreseeable future; however, like all other investments and securities, some price correction can be expected soon.
As the situation starts improving, investors will rush back to riskier assets, like stocks, and gold is expected to suffer a decline. As the COVID-19 hospitalization cases decrease and the public await another round of fiscal stimulus by the US government, the risk appetite of investors is rising again. Additionally, US President Trump’s announcement of seriously considering a capital gains tax was supported by the traders, and the positivity showed in the bullish opening of stocks.
Thus, the prospects of gold will be impacted adversely by the performance of the stock market. The upsurge in stock prices could be due to multiple reasons, including the reopening of society, the 2020 elections in the US, the Russian vaccine for COVID-19, and the generally high-risk appetite of investors. Whatever the reason may be, the bullish streak of gold will slow down as soon as investors’ faith in the stock markets returns.
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