Covid-19 impact on the price of gold
Jul 08, 2020
The rapid spread of coronavirus around the world has totally devastated the human lives as well as the global economy. Many different countries have declared a state of lockdown to contain the spread of the virus which led to shutdown of financial markets, businesses, corporate offices and events.
Due to COVID-19, interest rates all over the world are at low and investments in corporate bonds and stocks became risky. Within these conditions, people are investing more in Gold to offset their losses due to a volatile stock market and to produce profit. Central banks also purchased large amounts of gold to maintain adequate reserves and to support their economy as well as their currency. As the demand for safe haven assets like gold increases, the price of gold is also increasing.
Inflation has also a direct effect on the price of gold. When inflation rises, the value of currency decreases thus the only safe option is to invest in gold. Since gold is priced in U.S. dollars, any destruction in the money will rationally lead to a high cost of gold. As a result, during inflationary periods, gold offers a much more constant financial commitment than money.
This virus outbreak has created uncertainty globally and gold prices tend to rise in uncertain times. Experts say that gold prices are expected to remain high, as long as there is uncertainty in the global economy. COVID-19 outbreak is a crisis like no other, something which has not been witnessed since the First World War.