Could 2020 and beyond be the decade for gold? Recently there have been several projections showing gold topping $3,000 in the medium to long term.
Bank of America recently raised its 18-month gold-price target to $3,000 and Economist John Butler believes that Gold prices could climb to $5,000 in a few years due to looser fiscal and monetary policies implemented during COVID-19.
Gold at $3K is not farfetched, especially against the backdrop of the COVID-19 pandemic, recession fears, high unemployment, global uncertainty, struggling stock markets, economic slowdown worldwide, and low-interestrates. Gold also usually thrives in environments of low or negative interest rates.
Whenever the global economy faces a crisis, gold prices tend to benefit as investors seek the comfort of safe havens such as gold. This happened during the last financial crisis in 2008.
US Federal Reserve Chair, Jerome Powell recently warned of a possible recession due to the current pandemic as widespread bankruptcies among small businesses and high unemployment remains a serious risk factor.
Why Gold Prices could rise exponentially
Worsening economic conditions and recession fears
As uncertainty and recession fears linger, investors are on edge. They are taking money from the volatile stock market and seeking ways to protect their wealth. Gold is a safe-haven investment, a great store of value and an effective way to diversify one’s portfolio.
U.S.-China trade tensions, bickering, creating more uncertainty
U.S.-China trade tensions and relations are worsening, with both countries blaming each other for the Coronavirus outbreak. Any prolonged escalation of tensions could deteriorate market sentiments and be detrimental to the already volatile stock market.
Inflationary risks
With governments worldwide pumping massive relief stimulus money into their economies, some experts are warning that this could eventually lead to high inflation and devaluation of the dollar. Gold has proven itself to be a great hedge against inflation.
Concerns over a second COVID wave
Some are concerned that re-opening the economy too soon could prove counterproductive and disastrous, contributing to a resurgence in new COVID cases and further economic distress. This is adding more fear and uncertainty which could trigger an increased appetite for gold, sending prices higher.
Gold price outlook remains positive throughout 2020 and beyond. Despite recent fluctuations, there’s potential for prices to climb a lot higher. As of May 13th, 2020, Gold ended the day trading at $1,718, so with several projections exceeding $3,000 in the long term, now may be a great time to buy.
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