Gold has had a very interesting 2020 as market worries over covid and shutdowns have been offset by aggressive money printing and central banks pushing interest rates through the floor. Euro gold prices started the year at just a shade over 1300 per oz and during the year spiked as high as 1735 at the end of July. Demand peaked in April and August with the latter month being one of the busiest months on record for bullion sales. Since then prices have fallen back towards the middle of this range and sit at 1545 per oz today (08/12/2020). Early in the year the worry amongst investors was that covid signalled the end of the world and a freefall in stock prices was only halted by aggressive action from the Federal Reserve. Now the market is acting as if everything will be perfect due to the release of the covid vaccines. Its worth being cautious on this because the real damage may not be from covid itself but in the economy through government debt levels spiralling upwards and small businesses being hurt by constant lockdowns.
Right now gold is in a holding pattern below its yearly highs and we would expect to see some movement upwards in the price as soon as the US administration makes progress on yet another stimulus package. Disappointing jobs numbers last week in the US caused the stock market to rally upwards because this appears to make stimulus more likely, more quickly. This is the problem with where we sit right now – once governments and central banks begin to use money printing and lowering rates as a form of stimulus it becomes impossible to deviate off this path. Now there are only 2 choices – continue printing and see how long we can ‘extend and pretend’ or stop money printing and face a deflationary depression of a scale we ve never seen before in history. This suggests more money printing and higher gold prices in the years ahead is a safe bet in the present circumstances.
Take a look at Goldbanks commentary on the year to date on last weekends Sunday Independent: