HomeInvest Your Money

The Relationship Between High Gold Prices and COVID-19

The Relationship Between High Gold Prices and COVID-19
Like Tweet Pin it Share Share Email

There’s a reason why the value of gold goes up every time major economies get shaky – it’s one of the most popular low-risk investments out there, and investors want to make sure that they have a backup plan in case of an economic crash. Bonds, stocks, virtual currencies, and even cash are all vulnerable to being devalued if things go south, but in any scenario that would affect these investment options, gold would keep going strong. 

Since the spread of COVID-19 and the subsequent shutdowns, economists have predicted a global recession more severe than anything we’ve seen in recent history. The economies of countries around the globe are operating at the bare minimum, and it’s likely that recovery could take years. With so many market sectors suffering, why are gold prices so high? 

The answer is simple. When things get tough, people fall back on investments that they know won’t fail them. Since gold is known as a safe bet no matter what country you’re in, the demand for gold usually increases whenever there’s widespread fear or uncertainty about the future. This certainly isn’t the first crisis that’s driven gold prices up, or even the first pandemic, but many aspects of COVID-19 are unprecedented, and that’s led to equally unprecedented gold prices. 

The value of gold didn’t immediately shoot through the roof as soon as the virus became widespread; there was a gradual climb, along with the realization of how deeply the pandemic would affect the global economy. Gold prices hit their peak in August, exceeding $2,000 per ounce and setting a new record. A few months later, when a vaccine was announced, people started to feel like things were looking up and gold prices fell to $1,850 per ounce. That’s still a price that’s much higher than average, but it just goes to show how closely gold prices and uncertainty are related. 

How can we quantify “uncertainty”, though? We can’t, but we can see other factors that make gold an appealing choice when the future looks grim. 

Gold has the Kind of History that Few Other Investments Can Offer

Historically speaking, there isn’t a single culture that’s been known to prize Bitcoin as a sign of wealth. Stock market shares could be worth millions one day and pennies the next, all depending on market forces that are out of the individual’s control. Cash might seem like a safer bet, but it’s only as good as the word of the issuing authority. It’s not a common occurrence, but there have been instances of governments going under and leaving an entire country full of people with completely worthless cash. 

Gold, on the other hand, has been highly valued by every culture that’s learned how to mine and use it. Nobody who’s invested in gold will wake up one day and discover that it’s suddenly worthless. The trade-off is that gold won’t accumulate interest like many other investments, but when security is what you need, gold is the way to go.

Gold is an Inherently Valuable Natural Resource

You know how badly deflated currency can be described as “worth no more than the paper it’s printed on”? That’ll never happen with gold since the value is found in the actual substance. The actual monetary number that an ounce could sell for isn’t exactly set in stone, but the value doesn’t depend on an issuing authority. 

The supply of gold is also finite, which is an additional guarantee of continuing value. Just like other precious metals or gemstones, the limited supply makes the resource more valuable. The inverse is also true – just look at cubic zirconia, commonly used as a synthetic diamond. It’s possible to make technically perfect “gemstones” with cubic zirconia, but since the substance is man-made, there’s not nearly as much inherent value.

Gold is Tangible

This is another factor that adds to the feeling of security when investing in gold. You can pick it up, store it in a safe place, and not ever have to wonder if your investment will suddenly go south. The value of gold will fluctuate just like with any other physical possession, but no matter what the market does, you can be sure that it’ll retain a high value indefinitely. 

It’s Known as a Luxury Item

While this last one might not be a part of someone’s conscious decision to buy gold as an investment, it’s probably a subconscious part of the decision. Honestly, it’s not the worst thing that could influence someone to buy gold; this is because gold’s luxury status is well-known. Not to be overly simplistic, but if everyone thinks that something is valuable, it’s going to be valuable. Rarity or beauty isn’t a guarantee of high value; part of it is about notoriety, and that’s definitely something that gold has. 

What to Do if You’d Rather Sell than Buy

So far the focus has been on the people buying gold; what about the people who are selling it? Stocking up on gold isn’t a must by any means; there are plenty of strategies that can help you survive an economic recession. Since gold prices are so high, this is the perfect time to sell your gold, whether that’s in the form of bars, coins, or even old jewelry. 

As it happens, you can even find the right buyer without leaving the house – the best way to sell gold is to do it online. Well-established gold buyers will often give quotes for free and even pay for your items to be shipped to their facilities. There’s no obligation to sell once you’ve received the quote, so you can repeat the process with multiple buyers to find the highest offer. 

With so many people laid off due to COVID-related shutdowns, sometimes selling gold, rather than buying, is a step towards financial security. Whatever your next move is, gold could be a part of strengthening your personal finances. Diamonds maybe forever, but gold is something that could help you out right here and now.