A weakening Dollar and disappearing optimism for a quick recovery of the global economy let’s Karatbars CEO and founder Harald Seiz reiterate his view of gold as a safe haven.
The outlook for gold remains optimistic for the second half of 2020. It has rallied substantially throughout spring and early summer, because investors are betting on a continuation of zero percent interest rates, the persistence of the Corona pandemic, and an inflated Dollar.
The precious metal is on track to break more records in the coming weeks, because investors will most probably continue to choose safe-haven assets until the current crisis can be controlled.
Expert Harald Seiz points out that gold prices typically increase during an economic downturn, since it is a historically well-known if not proven asset.
Investors prefer gold over paper money
The price of the commodity has kept on rising during the first week of August because of a high demand for investments. At the same time the appetite for high risk or speculative moves has waned considerably. Last week traders said that 102 tons of gold were paid out to holders of gold futures. That was the largest one-day payout on the New York Commodities Exchange (COMEX). Seiz has noticed that the physical pay-outs of gold have risen in the last couple of months. “This shows that investors have a clear preference for the precious metal in comparison to paper money”, he says. Yet more of it is delivered to the COMEX warehouses than from them.
Breaking the 2000 Dollar barrier is only a question of time for gold
It is quite obvious that there has been a shift in investor preferences. Instead of betting on futures they are investing in Gold-ETFs (Exchange Traded Funds). These funds have been showing sharp increases for months now. Bloomberg reported that 155 tons, approximately half of the monthly global goldmine production, were flowing into the Gold-ETFs in July alone. For these reasons Harald Seiz as well as a host of other asset management experts don’t see a reason why this friendly climate for gold should end anytime soon. People around the world have come to accept inflation scenarios and skyrocketing global debt. “There seems to be less panic going around and people are focusing on how they can help themselves in an unstable economy.”, Seiz has noticed. “There is no reason why gold prices should be capped in such an environment.”
The current aggressive purchasing of gold will more than likely allow the commodity to break the 2000 Dollar barrier, and the question is rather “when” than “if”.
Even though the surrounding circumstances are somewhat worrying, these are reassuring times for people who hold gold as a store of value in their portfolio.