Historically, gold has always been renowned in Mexico as a viable and reliable safe haven during times of economic crisis, and there’s no real sign that this status has been undermined in the wake of the coronavirus outbreak.
However, gold has experienced an unusually chaotic six months at the beginning of 2020, with the precious metal showcasing the type of volatility usually synonymous with other asset classes.
In this post, we’ll look at how gold has performed so far in 2020, while asking what the outlook is like for the future.
The Rise and Fall of Gold in the First Half of 2020
The start of the year is always positive for gold prices, and while the precious metal didn’t rally in January as they usually do, the outbreak of the coronavirus in Asia sent prices soaring in February.
After the World Health Organisation (WHO) categorised the outbreak as a global pandemic on March 11th, the price of gold soared even further to $1,684, as governments rushed to implement quantitative easing measures and slash base interest rates.
However, a global stock market crash followed, with indices such as the S&P 500 shelving more than 11.1% in value in a matter of days. Interestingly, the price of gold followed this trend and bottomed out on March 19th, plunging below $1,500 as investors engaged in a huge sell-off.
Gold has also continued to rebound during the second and third quarters, and at a slightly faster pace than the global markets as investors have looked to prioritise more secure stores of wealth in an uncertain socio-economic climate.
How has Gold Moved Since and What’s the Outlook Going Forward?
Overall, the price of gold gained more than 16% during the first six months of 2020, rising from $1,515 at the end of December to an impressive $1,762 at the end of June.
This underlines gold’s status as a safe-haven asset, while it also hints at what may be to come in an increasingly uncertain and volatile global economy.
Certainly, we’ve seen bullish bets on gold drive further price hikes sinc mid-July, in anticipation of further coronavirus spikes and the impact of further lockdowns and labour market losses.
According to Arthur Idiatulin from Tickmill, this rally has seen the price of gold supersede its previous high of $1,920 per troy ounce (set back in 2013), although there remain concerns that the recent rally could represent hasty decision making and make it increasingly difficult to estimate the level from which correction will begin.
Over time, this could make it difficult to trade the counter-trend, which could cause some investors to be caught out by sudden or unexpected price drops.
For now, however, the price of gold remains high and continues to highlight the rush to safe-haven assets, and this trend is likely to continue into Q4 at least.