Is Pandemic the perfect time to Invest in Gold ?
The Coronavirus pandemic has led the world into a state of constant change. Amidst the economic restrictions and other consequences of the great lockdown, the financial markets of the world are constantly facing the battle of swiftly adapting to changing circumstances but there is one asset which has regained its fame: Gold.
Since the coronavirus outbreak and the consequent lockdown, which came to be called the Great Lockdown, started, investors across the world started to run to Gold- an asset known for its stability. Earlier this month, the price of Gold crossed a psychological milestone not reached since 2011, and the asset was being traded over $1950 per ounce. Many experts believe that Gold’s prices would continue rising in the foreseeable future.
The current global conditions have pushed the asset to an amazing rally. To put it in simple words, a rally is a period in which the price of an asset, a group of assets or an entire market increases, i.e. prices in a market follow an upward trend. So far in 2020, Gold has been up about 19%, helped in parts by the lower interest rates and the central bank stimulus in the U.S. which has aided the existing upward impetus.
Unlike other investment options, say Stocks, Gold is less prone to volatility and becomes a safer option for investment, especially during tough times like now. The price of the precious metal also acts inversely to that of USD, meaning whenever the price of USD decreases - which is the case for the recent time, the price of the Gold will automatically see an increase. Even though the problem of COVID-19 paints a picture of uncertainty, Gold is one of the most stable assets that has been performing well.
When markets across the globe were shaken by the pandemic, Gold wasn’t an exception and investors hurried to see off assets. In a short span, though, Gold earned back its ‘safe haven’ title and many investors came back to Gold. Experts think the price of gold will hit new highs in coming times.
Thomas Taw, head of APAC iShares investment strategy at BlackRock, has suggested that the precious metal will break the $2000 per ounce record from 2011. In April, the Bank of America made a similar prediction saying that the Gold prices may go as high as $3000 per ounce.
Many financial advisors recommend an absolute inclusion of the asset to every investor but to keep it between 1-5%. Now, experts are suggesting that this portfolio percentage for the asset may increase from 5-15%. So, how can one invest in this stable precious metal?
Thomas Taw of BlackRock suggests investors must first question themselves about why they want to invest in Gold. He says, “Is it for return potential or portfolio diversification?” Answer this, and then explore your options. An investor nowadays has multiple opinions when it comes to investing in the asset, which are:
Buy Physical: Buying physical Gold Bars and Coins is the traditional way to own and invest in gold. It is the most liquid way to invest in Gold which can be easily bought from stores, banks and other investors and just easily sold.
Buy ETFs/ETCs: Exchange-traded funds and exchange-traded commodities is an investment option in which you can track the price of the underlying asset without needing to hold Gold.
Buy gold-related stocks: There are various companies which are directly linked to Gold like Gold miners and producers, is also one of the options to invest in Gold. This is so because these companies tend to copy the performance of the asset but they are prone to swings in the stock market.
Buy alternatives: Alternative ways to invest in gold would be through gold-backed cryptocurrencies or foreign exchange trades but a certain level of trading experience is required to be proficient in this.
