The price of gold has undergone a sharp correction in the last few days, bringing the price of the yellow metal to around USD 1,800 per ounce. This despite the low interest rates and the continuing substantial dollar’s weakness. The reason is mainly to be found in the prospect of a positive scenario for 2021 that is emerging. This relative positivity is due to several factors such as: progress on vaccines for COVID-19, which could change the fate of the largest pandemic in history; the green light for the handover in the White House, with the establishment of Joe Biden and his team; the constant presence of governments and central banks in support of markets and the economy. This series of news has been welcomed, for the time being, positively by the market so as to push investors to abandon “safe haven” investments, such as gold, in favor of riskier investment categories such as the equity sector. It should also be added that in the course of this year the price of the yellow metal has had an important rise that has led it to exceed USD 2,000 per ounce, almost 35% more than at the beginning of the year. (approx USD 1,500). The temptation to make a profit has certainly facilitated sales and the consequent tracking of these days.
Has gold lost its shine?
According to our hypothesis this is not the case, at least for the moment. We think that gold will always maintain its reputation as a safe haven asset as well as its ability to maintain its purchasing power over time. Inflation expectations are likely to rise, thus making gold investment more attractive. Moreover, with bond yields so low and higher maturities, investors will be looking for alternatives in terms of yields and diversification in their portfolios. Not to mention that a further worsening of the pandemic, with possible lockdowns that could further paralyze the economy, could again give a bullish push to the gold price. We therefore believe that gold is a key component in any portfolio and should be seen in terms of risk diversification and to protect against any further unpleasant scenarios, such as those we are experiencing in this period.
