Gold prices have ticked past their $1,800 per ounce mark, not far from their all-time high reached in 2011, in the bleak aftermath of the 2008 Financial Crisis. The gold prices are set to climb to new records by the end of the year 2020, and it is no surprise.
As U.S. coronavirus cases have increased, exceeding 3.3 million with the nation’s death toll topping 135,000, and the country experiences a second wave of the infectious virus, apprehensive and distressed investors flock towards gold with certainty that the shiny yellow metal will hedge their portfolios from the prevalent global financial risks, providing a haven in these unprecedented times. It is evident in the above that individuals believe in the power of gold – in its ability to hedge. Yet, it is the least talked-about asset, the least touted investment.
Many individuals believe investing in gold is a waste of time, space, and money. Why run towards gold, then, when the economy is in trouble – when you are distraught? Some years ago, the great investor Warren Buffet claimed that the asset gold is ‘neither of much use nor procreative’.
How then do armies of investors and pools of buyers turn to gold when paper money and paper investments fail terribly ?
While gold may not be a typical, treasured investment among many, it is undoubtedly a haven when national and global economies succumb to the effects of financial, economic, and geopolitical crises. It has been observed in the past and present-day, too, that gold has continued to play its role as savior. Like in a knight in bright and shining armor, investments in gold have safeguarded investors from being financially dejected and desolate.
During The Great Depression, August 1929 to March 1933, people hoarded gold for financial protection. People exchanged paper money for gold in such extremes that the U.S. government feared they would soon run out of gold. A few years later, gold prices tripled in a day, skyrocketing from a mere $42 per ounce to a significant high of $120 per ounce when President Nixon detached the U.S. dollar from the gold standard.
In 2008, the Financial Crisis experienced a somewhat similar trajectory of events. The banking system and many businesses came to a complete collapse when the housing bubble burst, leaving many investors incapable of securing their finances. When at the beginning of March 2008, the Federal Reserve was forced to rescue the corporate bank Bear Stearns, the prices of gold rose to over $1,000 per ounce. The crisis had suddenly become an undeniable fact even among the most optimistic of investors. The aftermath of the disaster left gold prices soaring at $1,917.90 per ounce in August 2011.
Today as we see gold prices climb above the $1,800 per ounce mark, we should not be surprised or taken aback. It is time to act with thought and correct judgment. It is time to invest money in gold so that we are not left dejected and desolate in the aftermath of the global pandemic of 2020.