Gold is known as a safe-haven asset. Historically, it has risen in value whenever the stock market has crashed or when there has been high volatility in the world. The year 2020 has been full of volatility. The spread of Coronavirus has thrown the global economy into a recession and there are other geopolitical events happening simultaneously.
Unsurprisingly, gold price is up 15% this year. Gold price closed at $1753 on 19th June. The current price is also the highest since 2012. The recent surge has happened at a time when the World Health Organization has warned that the pandemic has now entered a deadlier phase with higher infection rates. US Federal Reserve officials have also warned that unemployment could rise again if the virus is not brought under control. Additionally, China has been tightening security laws for Hong Kong and Macau and has had a border conflict with India in which 20 Indian soldiers and an undisclosed number of Chinese soldiers have been killed.
Gold has formed an inverted head and shoulders on the daily chart and has broken out of the 1745 level. If the breakout holds, then the gold spot price could rise significantly. Goldman Sachs predicts that gold may touch $2,000 in the next 12 months. Bank of America has predicted a couple of months ago that gold could go as high as $3,000. Its analysts had said, “As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure.”
Gold-backed ETFs have been seeing plenty of interest from investors. Holdings of such funds rose by 30 tons on just 19th of June 2020. Gold investment returns, at 18.8%, have been quite strong over the last 3 months.