The price of gold is relative to the global economic situation. When the global economy is in a poor state, the price of gold increases. Investors purchase gold to secure their assets and have something substantial to shield them from economic crises and inflation.
In July 2020, investors were worried about a looming economic recession due to the Coronavirus pandemic. By August 2020, gold prices had reached an all-time high, closing at $2062.000 per ounce. Even with the hope of the Covid-19 vaccine and the Presidency of Joe Biden in 2021, the US economy continued to depreciate. The current price of gold stands at $1,915.51 per ounce, and it is predicted that in the next coming months, the price may increase further to reach anywhere between $2000 to $2100.
As the US economy continued to show weak growth in the last quarter of 2020, the demand for investment in the gold market saw a sharp increase, further spiking the price of gold. According to a report, there was an increased demand for gold coins and gold bars for investment purposes.
The World Gold Council issued a statement saying, “Much of the growth was in official coins, due to continued strong safe-haven demand in Western markets and Turkey, where coins are the more prevalent form of gold investment.” Investors bought gold bars and coins in such a large number that the global holding of gold was measured to be a record-breaking figure, standing at 1,003.3 tons.
However, the domestic demand for gold saw a sharp decline. By the end of the third quarter of 2020, the demand for gold had decreased by 10% because of the high prices, continued lockdowns, and the increased unemployment rate, which greatly affected people’s buying power. The demand for gold jewelry dropped to 333 tons, which was a 29% decrease from 2019.
So, even though the gold prices continue to plummet as we enter the first quarter of 2021, the demand for investment in the gold market is on the rise as investors rush to buy gold bars and coins. The domestic demand for gold will continue to decrease as the high price of gold will make it a luxury that will be unaffordable for the common man.