Finance

Gold so Far

The gold price AUD has sky-rocketed over this year amid geopolitical tension and health pandemics.

Very good news is not so good news when it comes to gold and the geopolitical crises roiling other marketplaces. This year we have experienced prices surges, increasing demands for tangible investments.

For thousands of years, gold has been regarded as the ultimate store of wealth.

In recent weeks, demand has gone up, with financial institutions buying up this precious metal and money streaming into gold-backed Exchange-traded funds (ETFs)

Why is this happening?

From treasures boxes lost at sea to gold necklaces traded at a pawn shop for cash, gold is truly a symbol of convertible wealth.

Throughout history, gold was used as money; it has actually been a tool that currencies are based on.

In June, the Perth mint will celebrate its 121th anniversary and the gold price AUD shattered the $2,000/oz. and seems to be soaring. Many believed it was because of the US China trade stand-off. However, we have bigger problems affecting the globe right now. 

These days, that US/China trade war seems insignificant because of the Coronavirus pandemic. 

In the last 12 months, there hasn’t been a shortage of crises. It seems that we move from one problem to another without recovering from the first crisis. This is one reason why the price of gold has been suspended as high as it has. First it was the trade war, then it was Brexit, then it was the never-ending tensions in Iran, then the Hong Kong protests, then the Coronavirus pandemic and so many other issues. 

Another important reason for investors to buy more gold is the drop in global interest rates. When interest rates are cut and banks still go on pumping liquidity into system, the influx of money causes currencies to actually lose value. When currencies lose their value, it is a good time to hold on to your gold.

When bonds produce multi-year lows and sometimes turn negative, precious metals like gold become more attractive.

Banking institutions and other financial institutions have slashed in a bid to stimulate fledgling economies are finding it harder to fight against deeply ingrained inequalities. 

Gold is likely to maintain its value, despite the unpredictability and risk, we have seen gold soar. But as the saying goes: whatever goes up must go down. Although the price of gold might have hit an all-time high above $US1, 800/0z during the debt-crisis of 2011, it fell rapidly to $1,100/oz.  Gold had a good run then but its fall was inevitable because people saw that as a bubble that could burst any time.

This coming year, central banks have been among the biggest gold buyers. These would be Russia, Poland, Germany, China, Turkey, China and even Kazhkstan.

Within the first six months of the year, more than 374 tons of gold was acquired by central banks. This is up 57% compared to the previous’ figures. This figure is growing as the world is set to continue dealing with the current crisis.

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