Gold price at historically high levels

  •   20/05/2020 - 11h28
  •   DEHOUI Lionel

The price of gold has not seen such a record since 2012. Indeed, this year, the hazards due to the coronavirus have spared nothing in their passage. The world economy was in near agony. It was a situation that stemmed from the containment observed in most countries of the world. However, the slow deconfinement that was slowly taking place has given things a bit of a boost. Even though the global economy is still struggling to recover. The gold sector is therefore also being called into question. The impact of the health crisis has sown doubts in all minds. The financial markets are still hesitating to restart their activities. The fear of a second wave of the pandemic is very present.

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Gold price at historically high levels

Some reasons for the soaring price of gold

Various arguments can explain the rise in prices. These include :

  • Demand: Apart from the financial world, gold is in demand in the jewellery and technology sectors. The demand for this precious metal is therefore strong and is not about to fall. For this reason, the impact on its cost is obvious.
  • Scarcity: the rarer the raw material, the higher its price. The scarcity of gold is therefore a convincing argument in the price increase.
  • Mining: It should be noted that gold mining has already extracted a lot of gold and according to industry analysts, only 50,000 tons remain to be extracted from the ground over a 15-year period given the current rate of extraction.
  • The craze: gold has always been considered a prime safe haven. It is indeed an excellent investment object. Banks and individuals are therefore investing more and more in the sector. Precious metals remain a safe alternative for investors. It will therefore remain at the top of the investment list.

 

Concern over rising gold prices

This year, gold is experiencing a sharp rise in prices. This is an exceptional situation that has not occurred for 8 years. On May 18, the price of an ounce of gold (31.1 grams) rose by 1.2% to around $1,760. This was due to investors' cautious stance on the economic recovery. According to Bloomberg, it is also a forecast by the U.S. Federal Reserve on a recession.

This price hike does not herald good news for the future. Being an investment alternative for investors when the economy is going badly, this situation shows that the financial markets are not at all in good shape. And if this continues, there is cause for great concern.

 

U.S. Central Bank: Warning and impact of COVID-19

The health crisis caused by the coronavirus has led to a major economic crisis. However, growth could resume fairly quickly even if the unemployment rate breaks records and the recession is deep.

This is a statement made by the president of the U.S. Federal Reserve, Jerome Powell this Sunday. Still according to his words, he estimates the peak of the unemployment rate at 20 or 25%. It is a probable estimate to come. U.S. GDP in the second quarter is easily expected to fall in the 20-30% range.

The United States will have been the country with the most deaths during this pandemic. Nearly 90,000 people have died in the United States, with an enormous number of infections: nearly 1.5 million. These are figures from the Johns Hopkins University. In fact, the U.S. economy has declined very sharply.