Centuries back, people valued gold for its beauty and high value. In Ancient Egypt, where gold was first discovered, it was already being utilized as a form of currency. The Egyptians valued it so highly to the point where they referred to it as the skin of the gods. Nowadays, while people don’t see it as a divine element anymore, they still acknowledge its worth as a precious metal.
The Rise and Fall of Gold
Gold is seen as a safe-haven investment because its value remains stable even in times of economic crises. This became apparent due to the recent COVID-19 pandemic. In 2020, the price of gold skyrocketed following the beginning of the global health crisis. CNBC reports that its price leaped by more than $200 in a little over two weeks, putting it above $2,000 per ounce for the first time. Overall, the value of gold went up by 34% and it was one of the year’s best performing assets. However, such an increase was short-lived as the price quickly plummeted in 2021. The trading heat map on metals by FXCM shows that XAU/USD has been on a steady decline over the last 90 days. This is in stark contrast to XAG/USD, which has been on the rise during the same timeframe. On March 8, Markets Insider’s gold price tracker shows that gold is just a little below $1,700 per ounce. The day before, it closed at $1,700.80, so it seems the metal is currently on a downward trend.
Gold’s drop in value is likely due to the state of the current global pandemic. With vaccines being rolled out and economies stabilizing, investors are no longer in need of a safe-haven asset. They can take on a little more risk and reallocate their funds to stocks, cryptocurrencies, and other high-risk high-reward products.
What Investors Should Do
Would it be wise to invest in gold now? Answers to this question vary and the ideal course of action depends on the investor and their goals. Those who say that gold is a wise investment in 2021 argue that the optimism towards the COVID-19 vaccine is short-lived. There are reported outbreaks of new COVID-19 variants, with Medical News Today citing three different known mutations of the coronavirus. One of those spreads more easily and causes more severe illness in affected parties. The presence of these variants makes the price of gold highly subject to change. If the times become more stormy, gold might become an attractive investment again. But if these new threats are contained, the price of the metal could plummet further.
As for those who say that gold isn’t a good investment in 2021, they argue that the precious metal is too volatile. Moreover, its long-term returns are negligible, compared to other investments. Gold is, after all, primarily used to preserve wealth, not to grow it. If your goal is to gain a sizeable return on investment, you’re better off elsewhere. Now that the economy is opening up, the number of lucrative investments are on the rise, like stocks. As it stands, gold prices seem to be on a downward trend. However, it’s hard to say for certain that this pattern will continue due to the uncertainties surrounding the COVID-19 pandemic. That said, investors should remain cautious and updated on current events, whether about the virus or the market. By doing this, it will ensure that their investments are informed and pose relatively low risk levels.