Gold will thrive after Covid-19, and a strong indicator of this is that precious metals prices have continued their six-month-long uptrend amid the Coronavirus pandemic.
The uptrend is a result of factors such as the U.S. economy that was contracted by nearly 33% in the second quarter of the year, and the V-shaped recovery that still has not materialized.
More so, stock markets seemed to shrug off the malaise, fueled by trillions of dollars in Federal Reserve stimulus. With the possibility of more stimulus uncertain, investors are beginning to worry.
But there has been one prominent bright spot for investors throughout this crisis, namely the performance of gold and silver. Gold and silver have demonstrated that they are once again acting as safe havens for investor assets.
Spot prices for both gold and silver have soared recently and, as anyone who has tried to get their hands on physical coins has discovered, the actual metals are hard to come by and commanding tremendous premiums when they are found.
Still, prices are destined to continue rising and predictions are ranging between $2,300 and $3,000 in the next 12 months with some occasional pullbacks.
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The main reason why investors should take physical ownership of gold is the risk of default. One of the patterns, which recurs throughout history is that growing financial sophistication leads to widespread expansion of credit and exposure to default. And few people successfully avoid it when it matters.
Banks, pension savings, mortgage guarantors, and all the major financial institutions on which we depend are tied up in a web of undelivered assets.
Gold accounts, indexes, spread bets, and futures all fail to extricate the buyer from the web of dependencies because they are based on undelivered gold.
The only way to opt-out of the web of government controlled undelivered assets is to own the physical property outright.
The fact that investors are allowed to store and hold gold outside of the financial system or banking system provides power and freedom, as well as decreases governmental control.
More importantly, owning physical gold and silver will hedge against an inflated currency, economic volatility, and stock market crash. This because precious metals move in the opposite direction of traditional securities like stocks, bonds, and mutual funds. When the stock market goes down, the price of gold tends to rise.
The demand for gold is buoyed by safe haven buying and global policy support in response to the pandemic. The gold price has risen by 34% since the start of the year, as investors worry about Coronavirus, as well as rising geopolitical tensions and the weakening of the U.S. dollar.
Gold’s current price level above the $2,000 an ounce mark proves that gold has doubled its value in five years. It is now a better time than ever to invest in this yellow metal.
When investing in gold, or in any other asset, you are likely interested in long-term price growth. With gold doubling the performance of stock markets over the past 20 years, it is an ideal asset for long-term investment.
So, what affects gold prices? There are five key factors.
- Demand for gold
- Gold supply
- Value of the U.S. dollar
Most investors who have not delved into the gold price and its history probably do not know that gold has averaged annualized gains of 10.6% since the beginning of 2001, while the Dow Jones has only grown at 5.0% and the S&P 500 at 4.8%.
Nor do they know that gold has outperformed stock markets on an even larger time horizon since the closure of the gold window in 1971.Goldco Precious Metals
There are a few reasons why gold prices have risen during Covid-19 and there are three main factors.
- Flight to safety
- Uncertainty about the future
- Loss of faith in the dollar
With stocks iffy due to concerns about the future of retail consumption in the age of Coronavirus, gold and silver stand out as safe and secure assets for investors to hold.
The future of the economy is still uncertain, and there is a strong possibility of a double-dip recession, with economic growth stagnating once again due to reduced consumer spending, high corporate debt levels, and doubts as to whether governments will take the right actions with respect to Covid-19.
With the Federal Reserve determined to keep asset prices elevated by printing more and more money out of thin air, the dollar will continue to lose its value and purchasing power.
And more and more investors now realize the importance of protecting their wealth with gold and silver. They are both physical assets that will stand the grueling test of time.
Gaining greater insights into the gold price, the history of the gold price, and how gold markets react to the economy can help make you a better investor. It also helps you understand what to expect from your gold investments, no matter what may take place in the economy.
Future investors need to know the best ways to invest in gold, and there are a number of ways to do so. There are options to invest in gold mining stocks, futures options (EFTs), gold bonds, or physical gold.
Investors can buy physical gold outright in form of gold coins or gold bars or by establishing a gold IRA or precious metals IRA that allows investors to roll over their existing retirement funds from their 401(k) completely tax-free.
Learn more about the best ways to invest in gold in our complete gold investing guide.
A rollover IRA is a term for an individual retirement account (IRA) that is funded by moving funds from a 401(k), 403(b), TSP, or similar retirement account into an IRA.
The main difference between a 401(k) and an IRA is that an IRA is normally opened by the individual rather than being offered by an employer.
With a rollover IRA, investors can use existing retirement funds to take advantage of a broader range of investments than are available through 401(k) investments alone. And by investing in a self-directed IRA, investors have even more options for investments, such as a gold IRA rollover.
When performing an IRA rollover, funds from existing tax-advantaged accounts can be rolled over into a new IRA tax-free. Investors can even roll over funds from multiple retirement accounts into a single self-directed IRA, making it easier to consolidate and manage their retirement savings.
A traditional IRA can be rolled over into a gold IRA, and investors who invest in a Roth gold IRA, will not be taxed at all on the gains on their gold investments.
To learn more about the benefits of investing in a gold IRA and how to get started, please request the free gold IRA guide here.