Gold Prices In 2021
Gold prices have seen quite an interesting change in the last year. The price of gold inflated drastically in 2020 as a result of the pandemic. What makes this different from something like the 1929 crash, is that the world transitioned into a virtual economy. This means people are purchasing their goods online. When there is dark economic times, it tends to bring the price of gold up. This has been a trend all throughout history that has carried on to 2021 now. Gold prices have stayed in the $1,700 to $1,900 per ounce range for a few months now. Usually as unemployment numbers start to fall, it would hurt the price of gold in this situation.
The thing is, despite dropping COVID case numbers, gold is still performing well in the market. Unemployment is still near an all time high, and jobless claims are either going slightly lower or higher every week. In the last year, there has been many great gold stocks to watch as a result of its record breaking rally in the market. But what does the future of the yellow metal look like as we continue through 2021? This is rather skeptical as nobody truly knows what direction gold could move in next. Some analysts think it could go way up, while others think it will tank. Let’s see how inflation affects gold prices.
How Inflation Impacts Gold Prices
As you may know, the government has been doing a lot for COVID relief lately. This includes multiple stimulus bills passed in the last year. Now there is another $1.9 trillion bill that has been proposed by Biden that could be passed. So one thing you may be asking yourself is, does this inflate the economy? Excessive inflation can cause a rise in wages and prices. Reflation on the other hand, is the act of stimulating the economy to reach regular levels of growth. The U.S. economy’s inflation expectations are growing at the moment.
But they are just going back to levels seen before the economy crashed as a result of the pandemic. Gold isn’t moving as a result of inflationary pressures. This is because there is no evidence of excessive inflation for the metal at the moment. Rising inflation could potentially be very bullish for gold. On the other hand, low growth and low inflation could also help the price of gold. Governments are forced to print more money or stimulus to avoid the economy imploding on assets and causing a depression.
The Gold Market In The Future
Gold can jump up in price just based on concerns regarding inflation. This shows how many are worried about the economy right now, and things are very unsure. For example, on February 21st gold went up 1.5% simply because of inflation concerns and a lightened dollar. An analyst for Commerzbank, Eugen Weinberg said, “The dollar at the moment is low and that is supporting. Also, the real reason for the gold prices to increase in the longer term is the chances of inflation picking up.” Right now your eyes should be set on this upcoming $1.9 trillion relief bill. If this bill is fully passed, it could potentially help boost the price of gold and gold stocks as well.
How Volume Impacts Gold
There are a few things to consider if you intend on investing in gold stocks. One note to take when investing in gold stocks would be the current volume and price of a given asset. The volume can sometimes dictate where a gold stock could be headed in the future. News and advancements in the sector can be very important to consider when investing as well. This can be things such as financial reports, quarterly reports, updates, and more. World news, as you have seen, can often be very impactful on the price of gold stocks as well.
Gold ETFs vs. Gold Stocks
Stocks are not the only way to invest into the yellow metal. There is also gold ETFs. Gold ETFs are commodity funds that trade in a similar manor to stocks. ETFs have become rather popular as a substitute for stocks. When investing in gold ETFs, you are not investing in gold in a physical way, but it is still backed by it. Gold ETFs attract investors as they are less costly than futures and commodity. This makes it easy for investors with a diverse portfolio to dip their toes into the world of gold assets. These are different from gold futures, which are essentially gold contracts that are traded on exchanges.
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So what is the point of Gold ETFs? Well, gold exchange traded funds were created to track the price of gold at any time. These ETFs were first brought to the United States in 2004. Investors have commonly seen the SPDR Gold Trust ETF as a small dollar amount way of investing in gold compares to stocks. Nowadays ETFs have become much more mainstream in terms of investing as an alternative to gold itself. These assets are especially convenient as they can be purchased through a brokerage just like stocks. ETFs can often reduce the risk of investing, but do not get rid of it completely.
How Inflation Impacts Gold Futures
Inflation can often affect Gold Futures, which are exchange traded contracts. With these contracts an investor will agree to buy gold at a specific date and price for a certain amount. The point of futures is to let investors simply aim towards long or short term positions. Futures will give investors more power and flexibility compares to gold stocks. Futures trade on exchanges as well, and can often be simpler to invest in than ETFs. Inflation can affect gold futures just like it can impact gold stocks. If inflation is rising, often gold prices and gold futures will as well.
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