Gold has always been and remains one of the most reliable assets, which attracts the attention of investors in periods of economic instability. This precious metal has maintained its value for centuries, serving as a hedge against inflation, economic crises and political instability.
Today, when the world has not yet fully recovered from the consequences of the COVID-19 pandemic, experts are increasingly discussing the possibility of new global epidemics. A logical question arises: how will gold behave in the event of a new pandemic?
How gold reacted to the coronavirus pandemic
To understand what to expect from gold in the future, it is worth turning to the recent past and analyzing how it behaved during the COVID-19 pandemic. At the beginning of 2020, when the coronavirus began to spread around the world, investors began to actively buy gold, seeking to protect their capital from uncertainty and falling markets.
In March 2020, when the global stock markets experienced a sharp collapse, the price of gold also temporarily decreased, which was caused by the need to liquidate positions to cover margin requirements. However, this decline was short-lived.
Since April 2020, gold began to rise steadily in price, reaching an all-time high in August of the same year, when its value exceeded the mark of $ 2 per ounce.
The reasons for this rise were massive economic stimulus, central bank interest rate cuts and higher inflation, which fueled demand for safe-haven assets. Investors sought protection against currency depreciation and a possible worsening of the economic situation, which made gold extremely attractive.
Gold and market panic
Gold has historically been the asset of choice for investors during periods of market panic. When uncertainty arises, be it financial crises, geopolitical conflicts or global pandemics, gold becomes a "safe haven" for those looking for ways to preserve their capital.
It is interesting to note that during periods of panic in the market, there is a correlation between the price of gold and the volatility index VIX, often called the "fear index". When the VIX rises, indicating increased market volatility, the price of gold usually rises as well. This is due to the fact that investors seek to avoid risks and find safer alternatives for their investments.
Why is the price of gold rising now?
Gold is currently in an uptrend again, and there are several reasons for this. First, a significant increase in demand for physical gold from the East, such as China and India, which are accumulating gold reserves. This demand puts significant pressure on the price of gold, pushing it up.
In addition, there has been an increase in the M2 money supply since October 2023, which is part of the so-called hidden quantitative easing by the Federal Reserve. This softening increases liquidity in the financial system, which, in turn, contributes to the growth of gold prices. In conditions of weakening monetary policy, even despite official statements about a "hawkish" approach, gold continues to update its historical highs.
These aspects explain why gold remains an attractive asset for investors, especially in conditions of economic uncertainty and soft monetary policy.
What will happen to gold in case of a new pandemic
Now that we understand how gold has behaved in the past and what factors affect its price, we can make some predictions for the future. If there is indeed another pandemic in 2025, gold will likely reassert its status as a safe-haven asset. In conditions of economic uncertainty, increased inflationary expectations and reduced trust in traditional financial institutions, the demand for gold will grow.
Actions by central banks to support economies, such as quantitative easing and interest rate cuts, will further support gold prices. Investors will seek protection against currency depreciation and market volatility, making gold one of the most attractive assets.
Visnovok
Gold has traditionally held its value in volatile times. In the event of a new pandemic in 2025, it can once again become a reliable asset that will grow in value.
Investors seeking to protect their capital will pay attention to the precious metal because of its stability and independence from other markets. Thus, gold will remain an important element of an investment portfolio amid global uncertainty.
Source: Ministry of Finance
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