Gold Price Skyrockets to An All-Time High. Here’s Why

Gold Price Skyrockets to An All-Time High. Here’s Why

Gold spot prices are trading at over US$1,931 at time of writing, an all-time high.

The high gold price is already translating to higher share prices for some of Australian gold miners.

As I write this, Saracen Minerals Holdings Ltd [ASX:SAR] is up by 5.03%, Evolution Mining Ltd’s [ASX:EVN] shares increased by 3.27%, and Northern Star Resources Ltd [ASX:NST] is up by 3.26%

What’s driving the gold price higher?

One thing driving the increases in the gold price is fear. There’s the pandemic, trade, and geopolitical tensions, as well as the fact that it’s starting to sink in that the economy isn’t bouncing back anytime soon as coronavirus cases around the world spike.

Uncertainty and fear are pushing demand for gold. But it’s not the only factor pushing the gold price higher.

Another one is interest rates.

You see, since the pandemic started, the US Federal Reserve has flooded the system with an unprecedented amount of money. Their balance sheet has ballooned from around US$4 trillion in March to US$7 trillion.

Governments have increased their debt to fight the pandemic. To allow for them to pay off all this debt, it’s likely that interest rates will stay low for a while.

One of the main criticisms for gold is that it has no yield. But negative real interest rates  makes the case for gold stronger.

The other thing pushing gold higher is that the US dollar has been dropping in value. As you can see below, the Dollar Index Spot, which measures the US dollar against a basket of currencies, has plummeted.

Gold Price - Gold Dollar Index Spot Price

Source: Bloomberg

The US dollar is losing value against gold too.

Gold so far in US dollars has delivered a 26% return year-to-date and a 57% return in the last two years.

It’s not just gold though…

Silver spot prices are soaring too, as you can see below.

Silver Price - Silver USD Spot Price

Source: Bloomberg

Since the low in March, silver has more than doubled its price. All this bodes well for the current gold rally.

Precious metals are taking centre stage. One way to get exposure to the gold rally is by owning physical gold.

To find out more about how to do this, check out Shae Russel’s step-by-step guide ‘Best Way to Buy, Sell and Store Gold’ here.

To read this free report, click here.


Selva Freigedo