A COVID-19 global pandemic is an unprecedented event that has disrupted the entire planet at blazing speed. Within months, half the planet has had its economic, social and commercial activities frozen. We have seen a collapse in global equities markets and the cratering of the oil market. Well, what about gold? As the ultimate haven of wealth, gold is expected to play an important role in the ever-shifting economic landscape. Let’s look at hove the COVID-19 pandemic impacts the gold price forecast.
A Run on Physical Gold
Toilet paper and hand sanitizer aren’t the only things that have been hoarded. Banks have reported a run on cash and gold dealers have seen a depletion of their physical gold inventory. In times of uncertainty and panic, physical gold begins to disappear at great speed. Since we are experiencing one of the fastest and greatest economic upheavals of all time, people are looking to get their hands on gold. This will naturally cause a rise in the price of the precious metal. Plus, this run on physical gold can also cause the premium speed on physical gold to widen. Simply put, you could expect to pay well over gold’s spot price to put a gold coin or gold bullion in your hands. You will want to stay on top of the latest gold forecast to know if this run on physical gold will continue.
Gold Outperformance of Equities
During bear markets, you can always expect gold to outperform equities. That doesn’t always mean that gold will go into a bull market. However, you can expect gold to lose less money than equities, allowing you to preserve your wealth. Right now, gold appears to be rising slowly, and while the gold price in Canada per gram has been fluctuating, it will be hard to forecast exactly what gold will do. However, it is a near certainty that gold will outperform equities in the intermediate to long term while the COVID-19 pandemic is disrupting the world’s commerce.
Possible Issues with Gold ETFs
Talk to any serious gold bug and they will have a problem with gold exchange-traded funds. That’s because many of these funds do not actually buy the physical gold to back up what is represented by its ETF. In fact, many gold experts have predicted that these gold ETFs will collapse. So far that hasn’t been the case. However, we could see a “stress test” in what these ETFs can do. If it turns out that the gold ETFs will not be able to match the spot price of gold, you could see a further rise in the value of physical gold coins and bullion.
Possible Great Depression 2 and Gold Confiscation?
Now here is where we look at the dark side of owning gold during a time like this. When there is a crisis in the markets, investors tend to look at what happened the last time a similar situation existed. The closest parallel to current events is what happened during the Great Depression. As gold historians will tell you, President Roosevelt outlawed the private ownership of physical gold with Executive Order 6102 in 1933. Owners of gold had to surrender their coins and bullion to the United States in return for $35 per ounce.
Some gold investors believe that if there is another Great Depression, the government could try to confiscate gold once again. The fear of that confiscation repeat could further propel the yellow metal higher.
Currency Collapse could Skyrocket Gold
As you already know, many governments around the world are spending hundreds of billions to trillions of dollars to offer grants, loans and direct payouts to businesses and private citizens. This act is seen as a necessary way to prevent people and companies from the worst effects of the pandemic lockdown, loss of jobs and closure of businesses. While these acts may be necessary, it may come at a lethal cost to a number of currencies. You can expect many currencies to devalue or even collapse. That could further send gold prices north.
Summing It all up
We are living in uncertain and unheard-of times. That means you can expect gold to outperform equities and move higher as long as the pandemic continues. You will want to stay on top of the latest news events to see what may affect gold’s price in the near, intermediate and long-term future.
