GOLD AND POST -COVID !
DOES MONEY KEEP BECOMING MORE VALUABLE?
DOES GOLD KEEP BECOMING LESS VALUABLE?
The emergence of COVID in a distant country seemed insignificant to the average European. Shortly after, the transmission of the virus spread across the entire world. People began losing their lives, and fear froze the whole world for a moment. Humanity started drifting into an unknown direction. The measures implemented by governments in order to overcome the raging threat reduced the consumption of all products, except basic food supplies, which began to be stockpiled in most households.
Gold recorded strong growth during that period.
Vaccines appeared and further polarized the world. Vaccines significantly saved the world, as they have many times throughout history.
The appearance of vaccines redirected the trend of gold value movements. Strong growth was replaced by a mild continuous decline. That was somewhat expected. The world became safer and more secure. Every person gained the opportunity to protect their health and reduce life risk to a minimum.
The prices of most products began to rise sharply.
As a result, we now have a situation where most construction inputs (materials) increased by 100–200%. The prices of new cars increased by 10–20%, the price of steel by 140%, household chemical products by 20–30%, etc.
All of this indicates strong inflation, meaning a general increase in prices. Inflation significantly reduces the amount of products we can buy with the money we have available.
The fight against COVID itself caused governments around the world to use various donations and incentives in order to save their economies. This led to money appearing in a larger volume than necessary. Strong demand and a surplus (excess) of money caused the value of most products to rise.
Based on rising prices, which are the result of the above-mentioned factors, we can conclude that money is becoming less valuable.
Gold is known worldwide as the most reliable protection against inflation. As a rule, the value of gold rises more intensely than the inflation rate. In this way, gold preserves the purchasing power of money. When we take this fact into account and observe that the value of gold is declining, we could conclude that money is becoming more valuable and gold less valuable, because the price of gold expressed in money is falling.
Is that really the case?
Of course not.
What is certain is that the price of gold is being artificially “held” by global centers of power in order to “hide” the strong inflation in the world.
Taking into account the historical fact that the price of gold rises faster than the inflation rate, the current price of gold should be significantly higher.
WHY IS A LOW GOLD PRICE GOOD?
The low price of gold has weakened confidence in gold among a certain number of investors who did not fully understand the importance of investing in gold.
Investors who bought gold at the peak of the pandemic would now realize an investment loss if they cashed it out (that is, they would be at a loss). However, investing in gold is a long-term investment. This means there is no intention of cashing out within a period shorter than two years. The investment term is only important from that aspect. From the liquidity perspective, gold is a cash equivalent, which means it can always be easily converted into the current currency.
We emphasize “current currency” because the possible replacement of currencies/currency is one of the identified risks from which investment gold protects capital. A relatively recent example from the near past is the replacement of the German mark with the European euro.
Gold is currently being artificially “kept stable” and is on the verge of strong growth, which is inevitable. The large amount of money and the strong rise in the prices of all products will inevitably change the current position of gold.
The stability of gold prices is beneficial for legal entities and individuals who plan to protect their business and personal accumulation through the purchase of investment gold.
This method of capital protection has gained importance since the appearance of the pandemic. High real estate prices and low interest rates have significantly contributed to such a status of gold. Investing in real estate has become highly questionable from the perspective of real value. Also, it is generally known that savings deposits in banks bring minimal returns.
The price of gold is expected to have a dynamic future. Most global economists expect that gold will soon shine stronger than ever before.
