Known to many as an inflation hedge, Gold now sits at its historically high resistance levels of $1886 per ounce (Oz). This asset soared into the $2,000/ Oz territory in August, 2020. Gold’s demand was driven by an increased investor appetite that saw it a sound backing to cash, cash equivalents and relative assets. Currently, Gold sits at $1,887 an ounce. Does this signal a decline in demand, what about the supply?
Years before the COVID-19 pandemic steadily saw a rise in value, and remained highly speculative to investors uncertain whether to sell or board the bullish market sentiment. 1st December, 2016, Gold was at $1,121 /Oz, guided by a strong dollar that was in the $100 zone at the time.
This translated to reduced demand as the need for Gold remained optimal.
Categorically, new Gold supply from miners into the market has not significantly affected its price. Instead, prices have soared and has seen swing traders reap significant gains. Gold’s demand will continue to increase in the coming years and there will be a significant rise in price. Long term traders are advised to hold onto their Gold portfolios. Important to note is the inherent commissions that are charged by brokerage firms while holding swing positions. Fortunately, persons and entities holding physical Gold have the luxury of zero commissions as they only need to sell at a time they deem fit without commission accruals. However, respective taxes are applicable depending on a buyer’s or seller’s jurisdiction.
Gold’s supply is reasonably sufficient to align with its volatility. The supply is sound enough not to flood the market. It remains a finite metal and has justifiable reasons to its cost that include expensive mining, durability and scarcity. Notably, three reasons explain the recent outperforming of other assets by Gold. These are:
- Low interest rates
- Gainful price momentum
- High risk hence attracting investors into Gold as a safe haven.
Arguably, Gold will continue to fetch attractive market prices and will form a sound benchmark to other metals such as silver and copper. Demand will as a result outweigh supply into the future and this might lead to an unforeseen long (increase in value) run of Gold prices.
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