What do you think about the further growth of gold price? Do you think that the upward trend is coming to an end? Or may be we observe a temporary turbulences caused by the US presidential elections and some other political reasons? The COVID situation is not optimistic, nor the debt problems. All such facts should cause further growth of safe asset prices...
When you wonder about the future direction of asset prices, I suggest (as a first approximation) you should consider the markets as 'efficient'. And you should always remember the market is a equilibrium process (every share bought is a share sold).
Efficient markets:
If you're thinking about buying gold for the reasons listed above, contemplate whether other market participants would have already thought about these factors. If market consensus agrees these are good reasons that the price of gold should be higher, then market forces should have already raised the price of gold.
Equilibrium process:
When you buy some GLD, someone is also selling some GLD. For whatever reason, this seller thinks it suits them to sell GLD at its current price. You don't know who this seller is, but you should consider the possibility that they know something you don't.
Dear Ben Skuse,
Thank you for your answer. Of course I know the theory, but what does it mean for the practice? Do you personally want to sell or buy gold?
I work on the stock markets and the sharp recovery in the equity markets across the group is only meaning valuations are at all-time highs in several countries broad market indices. Further, COVID apart, the volatility of Gold was high in the last decade or so compared to the last century. Keeping these in mind, I feel the importance of Gold will be more now than never before and hence more volatility and potential opportunities to hold gold for the short, medium as well as for long-term.
In my opinion, if, thanks to the ongoing programs of vaccination of citizens for the SARS-CoV-2 (Covid-19) coronavirus, in a few months the majority of the planet Earth's population is vaccinated and the level of collective social immunity increases significantly, the problem of the pandemic in 2021 can be solved. In a positive pandemic scenario, the impact of the SARS-CoV-2 (Covid-19) coronavirus pandemic on economic processes will decline rapidly in the coming months. The governments of individual countries will abandon the use of lockdowns imposed on individual industries and sectors of the economy by mid-2021 at the latest and the pace of economic growth will increase quickly. By that time, a significant part of countries will come out of the recession and the government will end the application of interventionist financial instruments of public aid to economic entities as part of anti-crisis socio-economic, budget, fiscal, sectoral policies, etc. In addition, the use of interventionist monetary policy consisting in maintaining record low interest rates and the direct purchase of Treasury bonds by the central bank may also end soon. As a result, the risk of another secondary crisis, ie a debt crisis in the public finance system, will not increase significantly in most countries. In the event of a significant improvement in the economic situation and avoiding the risk of another financial crisis in 2021, the situation on the financial markets will stabilize and improve. Therefore, investing in safe assets, such as gold, some currencies, bank deposits and treasury bonds, will not be attractive. Nothing spectacular should happen on the gold market in 2021.
Have a nice day, Stay healthy! Best wishes,
Dariusz Prokopowicz
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