The Gold Price Falls but Does That Mean It’s Trending Downwards?
As you may have already seen, the price of gold nosedived overnight upon the announcement of a potential COVID-19 vaccine that could be ready in months.
But if the world is set to reopen, does this mean we’re going to see the end of gold’s stellar run?
After peaking at a historic high in August, the gold price has been depressed, showing some signs of uplift as we drew closer to the US elections.
Gold tumbled 4.5% to US$1,864 an ounce last night, although it has now shown some signs of recovery, up 0.95% to US$1,872 per ounce at time of writing.
Your children won’t let you forget who’s paying the COVID bill
Investors flock to the perceived safety of gold in times of high market volatility — and we’ve had plenty this year.
With hopes of a vaccine lighting a fire under global markets today, it seems that people have forgotten that they are yet to settle the bill for the past eight months.
Here in Australia, we have seen some extraordinary measures taken by both federal and state governments, as well as the Reserve Bank, to keep us afloat during the crisis.
If we are about to see the end of this pandemic, then we should expect that the debt collectors are about to come knocking too.
What does this mean for the price of gold?
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Inflation has seemingly been put on hold during the pandemic.
But with us now at the tail end (hopefully), the effects of the massive amounts of cash printed and government spending sprees could be about to catch up with us.
We’ve already seen what massive amounts of stimulus has done to the gold price this year.
And if the Aussie and US dollars continue to be devalued through massive government spending, then the price of gold could push even higher.
Don’t forget the election
Although the result of the election is still being contested, the outcome doesn’t really matter for gold.
In USD terms, a Trump or Biden win could be good for the price of gold going forward.
If Trump pulls off the win after votes get recounted, then we could see the same deficit spending.
If Biden keeps his lead, there could be huge spending on free healthcare, income guarantees, free university, free childcare…the list goes on.
Either way, the more currency is devalued, the better the outlook for gold.
If you want to learn more about the future of gold, then check out this exclusive interview from The Daily Reckoning Australia: ‘The New Case for Gold: An Interview with Bestselling Author and Wall Street Insider, Jim Rickards’. Click here to learn more.
For The Daily Reckoning Australia