“I am not surprised that many investors, not only private but also institutional and professional, now view gold as a safe haven,” Torsten Polleit, a precious metals expert and chief economist at Degussa Goldhandel, told SNA. "Because gold allows investors to protect their capital in the long term from currency devaluation and default on loans."
According to the report, financial experts in the US suggest that gold prices will rise "in the second half of the year to $ 2,000 per troy ounce." “I definitely confirm this trend,” said a financial insider assessing the current situation in the gold market. The precious metal is currently worth around $ 1891 an ounce, which is the equivalent of around € 1,554.
He also added that the rise in the price of gold may take many years. “The fact that the price of gold will rise in the long term is nothing new. In August 2020, the precious metal was able to reach its previous maximum ”. Since then, the gold price has dropped because “US interest rates have gone up slightly. But since the end of March this year, the price has risen again and is returning to this long-term uptrend. "
It is only a matter of time before gold surpasses the $ 2,000 an ounce mark again - not least thanks to the decision of the world's central banks to increase the money supply. "There are many factors that affect the price of gold," writes Sputnik International, including currency devaluation, that is, inflation, which is also caused by the coronavirus crisis, as well as geopolitical tensions and trade wars.
According to an expert from Degussa, central banks are also responsible for the dynamics of prices for precious metals, so he actively criticizes their monetary policy. “As monopolists in the production of money, central banks have launched printing presses to their fullest to ease the consequences of a politically motivated lockdown. For example, the money supply in the United States has increased by about 30% compared to February 2020. In the Eurozone, the money supply increased by about 10% ”. But: "This economic recovery is based on sandy feet," says Polleit.
It is known from economic theory that if the amount of money increases, then the prices of goods will also rise inflationary, the financial expert explained. But this is precisely the policy that the US Federal Reserve and the ECB are currently pursuing. In his opinion, the Fed and the ECB will implement this strategy until 2023 - with potentially fatal consequences: “They tried to whitewash the problems created by the state and the government by spending new money,” he continued. “You can already see this in the stock markets. People notice this in house prices or rent increases. Now this problem will be reflected in the cost of consumer goods. " Including increases in electricity and food costs.
The global over-indebtedness of states and individuals is also "very, very high," the expert said during an interview. Thus, the Institute of International Finance (IIF) of the United States calculated that "world debt is approximately 360% of world economic production." This is a sad record because the world has almost four times more debt than it can generate profits.
All this is good for the yellow precious metal. “Gold is a classic defense against losing the purchasing power of money,” says Polleit. But other commodities and metals are currently benefiting from the current crisis. “For example, platinum group metals. Platinum has risen in price by about 41% over the past year. We are seeing a 33% increase in the price of palladium and 57% in silver. The price of gold lags behind them, which means it has the potential for growth, ”the analyst said. The growth of inflation in the economy is a vivid proof of this.
The financial expert called the implications for the industry: "Of course, companies are faced with the problem of increasing costs for the procurement of manufacturing materials." In his opinion, this can lead to an "economic brake". According to the expert, the global demand for gold jewelry has more than doubled compared to the previous year. Gold bars and coins are in no less demand. “Instead of time and savings bank deposits, on which you no longer receive interest, I recommend gold and silver in the form of coins and bars. And as an investor, please maintain a long-term investment horizon of several years. "