The yellow metal, gold is valued for many reasons. The uncertainty created by global pandemic COVID-19 saw an investment drive and the value of gold reached record high in 2020. However in 2021, gold has suffered the largest quarterly selloff with prices dropping sharply.
Interestingly, increasing inflation rates have not corresponded to an increase in gold prices so far. This is due to the fact that the global economy is still under extreme stress and the path of total economic recovery is not going to be very smooth in many countries of the world.
Gold market experts also speculate that bitcoins and cryptocurrencies might be replacing gold for certain investors who are willing to take larger risks. Despite this, gold continues to be a safe haven of investment for certain investors. These investors also believe that gold will reach a record high price in 2021.
So here are some of the reasons why you should stay bullish in the gold market in 2021.
#1. Gold Market is in the Midst of Bull Market
In the years 2016 and 2018, gold prices saw a steady momentum. The prices increased but remained relatively stable. With the start of 2019, gold prices saw a good increase and this trend continued till 2020. This is a positive trend and will continue further. So the gold prices are likely to increase in the future.
#2. Interest Rates Will Remain Low
For the past several years, Central banks around the world have been maintaining negative interest rates. This step has a huge impact on financial markets and commodities, including gold. As a general rule, low interest rates result in increased prices of gold. This is one of the reasons why gold has become an attractive investment option.
#3. Increase in rate of Inflation
When the inflation rates increase, gold tends to maintain its purchasing power. So historically speaking, gold is poised to perform even better in the event of inflationary pressure. With the global lockdowns caused due to COVID-19, inflation rates in several countries are bound to increase. This will have a positive effect on the price of gold.
#4. Instability in Global Politics
Gold is a safe haven of investment during times of turmoil and political unrest. The global pandemic has resulted in weak connections between certain countries. This has increased the political unrest and instability. All this results in a positive impact on the price of gold. This is therefore making gold a safe haven of investment.
#5. Gold Negatively Correlated with Equity
Gold returns go up when the equity returns go down and vice-versa. So whenever your equity portfolio underperforms, gold will outperform. This will help you to average out the returns.
You can consider using live gold recommendations to get updated information about the market performance. Getting good gold signals and gold trading tips will help you to get updated information about the gold market.
Due to all the features of gold stated above, gold acts as a shock absorber for your equity portfolio. So a smart investment in gold will go a long way.