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For the first time, the price of gold surged over $2,000/ounce last week. This unexpected rise was in the midst of the U.S.’ fierce battle against Covid-19 as cases rose to 5 million marks. This increase has also ignited theories that gold could quickly ride it up to $4,000 in a few years, but only if two significant events are considered.
U.S. Global Investors CEO Frank Holmes said in an interview with CNBC that gold can be worth $4,000/ounce in the following three years. Holmes mentioned specifically how the G-20 finance leaders and financial institutions are “printing trillions of dollars,” working like the mob, printing money with 0 interest rates. And at this rate, gold becomes a worthwhile asset.
And with a lenient policy, investors are expected to rely on gold more than other assets. Gold prices are also likely to rise when yields plummet and vice versa. Therefore, the cost of investing in gold is lower as stockholders do not waive interests that may be earned by investing in yielding assets.
Two Factors That Greatly Impact Gold Prices
But this positive forecast may be ruined if two significant events are overlooked. First is the development of a coronavirus vaccine, and second is the outcome of the November presidential elections.
BMO Wealth Management chief investment specialist Yung-Yu Ma mentioned that different factors could affect the price of gold, but these two huge ones can lead to a dramatic change. He added that they are safely considering these factors since these can significantly impact gold prices.
Developing a coronavirus vaccine can cause a positive shift that can benefit the price of gold. At the moment, there are ongoing clinical trials for safe and effective vaccines. Health leaders say it won’t be long for an effective vaccine to be developed, and the biggest hurdle has to be the distribution of these vaccines.
When it comes to the results of the U.S. elections, the value can react appropriately. Gold prices may even fall lower $1,600 post elections and may start to climb again in 2021. The U.S. presidential election is less than a hundred days, and President Donald Trump has mentioned numerous times that it should be delayed. Trump has trailed Democratic presidential candidate Joe Biden by double-digits. Biden led Trump only previously in a poll in July.
Investors may also be considering similar outcomes in 2016 after Trump’s unexpected win over Hillary Clinton. After the election, people turned to gold as a safe investment and forced prices to increase at around 5%.
Silver Values Also Rise
And aside from gold, the price of silver has also surged by a third. Experts also say that this may be due to the massive increase in coronavirus cases and the lack of a strong response of the U.S. to bolster its economy.
XM.com Peter McGuire also predicted that gold might reach $2,200 by December, and other precious metals like silver, palladium, and platinum will also see similar gains.