This is not financial advice, just an informative insight.
The gold market is constantly changing and evolving to fit with the modern economy – which makes it a hard investment to make. Therefore, the time period in which investors should invest in gold is incredibly important. The best time to invest in almost every asset, especially gold, is when there is a negative sentiment, and an inexpensive asset – therefore providing a potential return. Gold has a high importance in the modern economy, as it has been proven to successfully preserve wealth through thousands of generations. During times of political and economic uncertainty, investors typically look to gold as a ‘safe haven’, as their wealth can be protected. The fact that gold works as a safe haven asset, means that the commodity is a great hedge against inflation and financial troubles.
The market itself is driven by the effects of the economy, such as persistently high inflation and rising interest rates. During the past year, the price of gold has increased drastically, marking a 25.6% growth year-over-year. However, the World Bank predicts that gold is likely to decrease in the next 10 years. The outbreak of the Coronavirus fuelled demand for gold, due to such high level of uncertainty in the global economy.
Because it is such a mature and established market, there is a number of factors which affect how it is priced. It can also be a unique asset compared to investments into stocks or bonds, which also makes the market unique and as a hedge against inflation and other financial concerns, as previously mentioned. A list of factors which are to be considered include:
- Consumption demand
- Gold and interest rates
- Gold and inflation
- Geo-political factors
- Future gold demand
- Weakening dollar.
Predictions for gold over the next 10 years
The movement of the gold market is primarily going upwards, but at a slow pace. As mentioned previously, the World Bank predicts that the value of gold is likely to decline in years to come. This is due to a number of factors, the first one being that of inflation. During periods of economic decline, the gold market has to ‘compete’ for profitability and investor attention, which is why the World Bank expects a slow down fall of the market.
Another reason to why it will decrease is that of geopolitical tensions, which has posed the risk of a recession. The current world tensions can be the main source of uncertainty for investors, especially for that of the gold market. Finally, interest rates have significantly affected the gold market. The coronavirus pandemic drastically effected the global economy, which forced interest rates to rise. Therefore, casing a negative correlation in the investment in the metal.
Devon gold is a leading gold investing service in Devon. Here, we offer a competitive price for your old scrap gold, which could prove to be an effective investment in the current economy. We will always positively and confidently offer the best possible price for your gold.