Gold Off to a Good Start in 2021, Rise to a 2-Month High
After a suppressed two months, gold prices, on Jan 4 rallied, breaking above consolidation to post a two month high. The surge also concludes what was the best returning decade in gold's history, according to statistics. Even at spot rates, analysts expect gold prices to add to their gains as investors flock to hedge the effects of government intervention. It is the aftermath of a year of money printing to arrest the economic consequences of the coronavirus pandemic.
Gold is a time-tested store of value that's held by central banks. Superior with intrinsic value, gold is a hedge against inflation or economic turmoils. In 2020, several governments embarked on easing campaigns, slashing interest rates, and printing money. There are fears of high inflation, and the FED has already said it is willing to let inflation rise above two percent. For this, gold and haven assets will likely benefit in the medium term. Accordingly, gold prices will expand as the stimulus program heaps pressure on the greenback.
Impact on Gold prices:
Bullish. Stimulus packages and helicopter money will positively impact gold. In the immediate term, the risk-on environment makes aggressive investors swap their dollars to risk-sensitive economies like commodity dollars and emerging market currencies, subsequently supporting gold.
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