Five Reasons gold prices could spike again
Saturday, January 16th 2021
The uncertain times of the past few weeks have meant that the price of gold has been on an unprecedented upward rise. The latest high of $1,779 is one of the highest peaks that gold prices have hit in the last decade. However, it could all be just the lull before the storm and the price of gold might be on the verge of exploding even more, and here are the 5 reasons why that could be a very strong possibility in the coming weeks.
Corona virus is on the resurgence
Economies around the world were hoping for some positive news on the global pandemic front and while things seemed to be on the mend recently, it now appears that the situation could be getting out of hand once again.
While a spike in cases was expected as the economies around the world reopened, they weren’t expected to spiral out of control so drastically. The last few days has seen many countries, and more importantly, some of the big players in the world economy report their biggest single-day spike in positive case to date.
This hasn’t deterred countries from reopening almost everything including public places such as bars and allowing sporting events to be organized again. As a result, the number of cases is only going to increase even more.
New European tariffs
The United States is entering a very important phase as the presidential election is to be held soon. To project a strong outlook, current President Donald Trump is expected to introduce new tariffs for trade with the European countries such as France, the UK, Spain and Germany.
The initial reaction to the speculated tariffs has been negative and Trump is not expected to back down which means that these trade relations could be in jeopardy. At the very least, there will be some volatility in the coming days, and investors are expected to invest heavily in gold to be on the safer side and that is expected to drive its price quite high.
Of course, nothing is confirmed yet and if these trade tariffs are somehow avoided, gold prices won’t see a big spike. It all depends on how strong of a stand Donald Trump is willing to take in the next few weeks.
Tensions between China and the USA
This is not a new issue but one that has only gotten worse with time. The US-China trade relation is one of the most substantial ones in the world and as such has a huge impact on the economy of the world as a whole.
China hasn’t exactly behaved as the US wanted it to. Neither of the two superpowers has shown any intention of backing down and that is only going to further deteriorate the already fragile trade relations between these two economic giants.
After America banned several Chinese products and companies, China has retaliated by massively reducing its agricultural and poultry imports from the United States.
This has put a sizeable dent in the American economy and as the US is expected to further distance itself from China, China is expected to do the same and the resulting loss in trade will cause a lot of instability.
This will reduce the confidence investors have in the stock market and gold will be seen as a much more worthwhile investment which could further increase its price.
Rising unemployment numbers
While the unemployment data last month was mostly speculative and predictive in nature with regards to the effect of the global, this month’s data has given a much clearer picture of the actual impact the corona virus has had on the job market.
The data paints a very bleak picture and different prediction models suggest that things are only going to get worse with each passing day for at least the foreseeable future. A lot of this has to do with many prime locations around the world being shut down yet again after a re-emergence of the pandemic and stores and outlets in these places have to closed again.
The job market has a huge impact on the Federal Reserve and as there is no light at the end of the tunnel in sight yet, things are only expected to become worse. There is little the central banks of some of the biggest economies around the world can do in this regard and this lack of a positive outlook any time soon will end up making investors quite nervous.
A docile earning season
As the third earnings quarter is coming to a close, the stock market is not showing any signs of recovery. If anything, it is expected to show a secondary decline of a similar magnitude as the crash immediately following the emergence of the Covid-19 pandemic for the first time.
The cash burn rate of economies around the world has reached an alarming rate and it too has little to no chance of recovering anytime soon. The US stock market is expected to continue in a risk-off mode and this will make gold even more attractive for investors.
All these factors combined could send the price of gold soaring to new and unprecedented heights in the coming weeks.