There seems to be no stopping gold as its price continues to soar. The precious metal has returned over 30% in 2020 and over 45% over the last year. The “smart money” — hedge funds, family offices and investment banks — continue to drive its price higher with a record-breaking 3 235t of the precious metal bought in 2020 alone.
Meanwhile, the US economy has seen its worst quarterly GDP drop in history, plunging 33% in the second quarter.
So, what’s going on?
July marked gold’s fifth straight month of gains and its best month since 2016 with prices hitting a new all time high of US$1 900/ounce at the end of last week and then again earlier this week with the price hitting $2 005/ounce. The bull run began in late 2018 and has gathered momentum during the coronavirus pandemic. Investors, concerned by the ongoing pandemic and worsening US-China relations, turned to their investment of choice in times of uncertainty on Monday, pushing the price of gold to its highest level ever.
What does this mean?
Coronavirus seems to be getting worse in the US, which partly explains why the country’s government is aiming to announce another $1-trillion of support for workers and the economy. One possible result of all this spending, combined with unlimited central bank support, is rapidly rising inflation: More money sloshing around in the economy could see prices for goods and services rise quickly when demand returns, in turn eroding both the value of cash and the regular income paid by bonds.
Investors think that’s an environment that’ll suit gold, and they’ve been buying up the shiny metal in droves.
Revix, the online investment platform backed by JSE-listed Sabvest, offers an ultra-simple and low-cost way to invest in gold. With no monthly account fees and no sign-up fees, you can start investing with as little as R500 as a one-off investment. The only fees that are charged are a low 1% buy and sell fee making it the easiest and most cost-effective way to get exposure to the precious metal.
Is now the time to invest?
New York investment bank Goldman Sachs is raising its price target for gold while sounding the alarm about risks to the US dollar.
In a note to clients on Tuesday, the bank reaffirmed its position of gold being “the currency of last resort” amid uncertain economic conditions, raising its price target for gold to $2 300/ounce after a surge to record levels earlier this week.
The bank tied the metal’s rally to a “potential shift in the US Fed towards an inflationary bias against a backdrop of rising geopolitical tensions, elevated US domestic political and social uncertainty and a second wave of Covid-19 related infection.
“Combined with a record level of debt accumulation by the US government, real concerns around the longevity of the US dollar as a reserve currency have started to emerge,” the note explained.
“Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows,” the bank said. “With more downside expected in US real interest rates, we are once again reiterating our long gold recommendation from March.”
Sean Sanders, the CEO of Revix, added: “While gold hasn’t been among the more attractive areas to have put capital over the last 15 years, today you’ve got a big safety play under way. Think ahead to what the world will look like in two or three years’ time with all this new money floating around and ask yourself whether you would rather hold rands or gold?”
How to invest?
Through Revix’s online platform, you can invest in physical gold held in fully insured LBMA London vaults and not have to worry about the custody and insurance burdens of physical ownership. Revix offers a Paxos gold token which is backed by one fine troy ounce of the highest quality LBMA gold and, unlike other investments, Revix enables you to buy and sell your gold holdings whenever you choose — whether that’s in a couple of hours after purchase or in many years’ time.
Revix brings simplicity, trust and great customer service to investing. Their easy-to-use online platform enables anyone to securely own the world’s top investments in just a few clicks.
Revix guides new clients through the sign-up process, to their first deposit and first investment. Once set up, most customers manage their own portfolio, but can access support from the Revix team at any time.
For more information, please visit www.revix.com.
This article is intended for informational purposes only. The views expressed are not and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any of the assets or securities mentioned herein. Past performance is not necessarily indicative of future results. All investments carry significant risk and all investment decisions of an individual remain the specific responsibility of that individual. You should not invest more than you can afford to lose and, before investing, please take into consideration your level of experience and investment objectives, and seek independent financial advice if necessary.
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