Anyone who has been eyeing the gold price this year has to be wondering whether gold will break its all-time record high. Investors who had taken the plunge and invested in gold in recent years had benefited from some of the gains it already made, although they kept wondering when gold would really make a run. With the economy set to fall into recession at some point, it was only a matter of time before the gold price would take off.
We may be seeing that now as, despite the fact that stock markets remain high too, gold has pushed above the $1,800 an ounce mark and seems set to stay there. Now that the record price is within sight, this could be the year that the gold price breaks that record. Here are four reasons why.
1. The Gold Price Is Already Close to the Record
The first reason is obviously that gold is already close to its all-time record. Gold began the year at just over $1,500 an ounce and is now at over $1,800. That’s not too far off the all-time high gold price of $1,920.30 set in September 2011. And in fact, gold’s price performance this year mirrors 2011 in many ways.
In 2011, gold began the year at a little over $1,400 before climbing to over $1,900 in September. Gold has followed the same trajectory this year so far. Will we see the record gold price shattered this September? Certainly if gold continues along this route we could see gold at over $1,900 by then, if not over $2,000. Two months is a long time, and a lot could happen between now and then that would boost the gold price.
2. Stock Markets Are Clearly in Bubble Territory
By now it’s clear to just about everyone that stock markets are firmly in bubble territory. Stock market performance no longer has any correlation to economic performance or even to business performance. In fact, bad news from companies about falling revenue and more layoffs is often just brushed off. Markets seem to get a shot in the arm from hopeful headlines about COVID-19 vaccines and fluff commentary about how the economy is going to recover.
But what really is driving stock markets right now is Federal Reserve money. With trillions of dollars of easy money having been created over the past several months, the Fed is actively keeping stock markets afloat. That’s partially because the Fed doesn’t want to be responsible for a market crash, and partially because it’s receiving pressure from President Trump to keep stock markets elevated so that voters will remain happy come November.
As with any bubble, however, it will burst at some point. When exactly that burst will take place and what will precipitate it is unclear. All we know is that stock markets are due for a correction, and when that correction occurs, the gold price is likely to jump.
3. The Economy Is Going to Crash
Both politicians and economists are falling all over themselves to talk about how strong the US economy is and how well it’s going to recover from lockdown. But with many states continuing their lockdowns or engaging in a second phase of lockdowns, there’s no way the economy will get back to normal anytime soon.
Employment remains down, and although temporary unemployment is beginning to fall as businesses are reopening, permanent unemployment remains elevated. By the end of this year, it will be clear that millions of Americans will be out of jobs for a long time to come.
The effect that will have on the US economy can’t be underestimated. We’re still only a few months into the recession, but with many people having lost jobs, consumer spending will be dampened considerably. From clothes to food to cars, businesses all across the country are going to see huge hits to their bottom lines. By the time we reach the depths of this recession, it could be worse than 2008. While that is bad news for US businesses, it’s good news for gold, which should continue to rise in price as the economy worsens.
4. Investors Are Looking for a Safe Haven
Just like in 2008, investors are looking for a safe haven to park their assets. The past few years lulled many investors into a state of complacency, as sky-high stock markets created a record number of 401(k) millionaires. Now those investors are looking to protect their millions in any way they can.
Gold has always been a natural safe haven, and investors have trusted its security and stability for centuries. The more safe haven buying there is, the higher the gold price rises. And even though we haven’t even seen a huge surge in safe haven demand yet, gold is already pushing towards its record high.
Many investors may not be aware that they can protect their existing retirement savings by rolling over their assets into a gold IRA. Assets from a 401(k), 403(b), TSP, IRA, or other tax-advantaged retirement account can be rolled over or transferred into a gold IRA that offers the same tax advantages as a conventional IRA account but with the added benefit of being able to invest in physical gold coins and bars. If you’re looking to protect your retirement savings with gold, a gold IRA may be just what you’re looking for.
How High Will Gold Go?
With the gold price almost certain to hit a record high this year, the only question is: how high will it go? From 2008 to 2011 we saw gold triple in price. Similar performance today would mean a gold price over $5,000. Is that a little far-fetched?
$5,000 may be a long way off, but $2,000 seems much more attainable. And that milestone could be reached this year. Remember that gold is only about $100 away from its all-time high, we haven’t even seen the worst of the recession yet, and investor demand, while increasing, is still lower than it could be. Once we start seeing a wave of bankruptcies, financial institutions getting into difficulties, and stock markets finally hurtling steadily downward, the gold price will finally get the boost it needs to start really skyrocketing.