Investors consider gold as one of the best investments to make, as it easily recovers its worth during economic downturns. Its price also moves in the opposite direction of stock market or economic fluctuations. Purchasing gold is not the same as purchasing stocks or bonds. You may purchase gold coins or gold bullion to take physical ownership of the precious metal.
Gold bullion is in the form of a bar with a stamp that indicates the gold bar’s purity level and quantity of gold. Some dealers, brokerage companies, banks, and the United States Mint, which has been making gold coins since 1792, sell bullion and coins. Investing in gold is globally recognized, especially in the US.
US investors are like hungry mammals when it comes to gold bars and coins. In 2020, it was reported that demand for gold coins and bars in the United States increased, mirroring the surge in gold ETF holdings, which reached new highs. Retail investment more than tripled to 66t in 2020 after struggling at a relatively low 20t in 2019. In volume terms, it has soared to nearly US$3.8 billion, the highest level since 2011.
As per new data from the United States Mint, this pattern does not appear to be slowing down in 2021. In January 2021, revenues from gold Eagle bullion coins surpassed 220,000 ounces (6t). The trend seemed to continue into February, with sales reaching 118,500 just after the halfway point of the month. To have an idea about what sparked this enthusiasm in the past year, here are four main elements that we may consider:
- The COVID-19 fear-factor
During the past year, the COVID-19 pandemic had a noticeable effect. The US Mint’s dramatic increase in sales of gold bullion coins during March and April is direct proof of US investors’ strong reaction to the virus’s unprecedented spread at the time.
- Savings that have been sitting idle
GDP growth shrank by 31% in the 2nd quarter of the past year. And the unemployment rate rose to 15% – which made the aggregate income change drastically. Meanwhile, consumer spending has decreased. Since they can’t afford to go out and visit malls and restaurants or go on vacations, these extra dollars could be invested in a variety of financial assets, and gold is one of the most probable beneficiaries.
- Cuts in interest rates and inflation fears
With the Federal Reserve cutting rates to 0 in the first quarter of the past year, rate cuts fuelled investment demand.
- The price of gold is increasing
The rise in investment was boosted even further by the fluctuation in gold prices during the year. Throughout 2020, the price of US dollar gold increased by approximately 25%, hitting new highs in the month of August.
Although the performance of 2020 does not indicate the same for the current year, we see, with how things are going, that the gold investment will be highly supported by hungry US investors.