Since the beginning of the year, when the world woke up to the coronavirus that had begun in China in late 2019 and the world pretty much went into lockdown mode around March, gold has become harder to find. Because gold is regarded as a store of value in difficult times, when the world went on lockdown, gold suddenly became the most sought after commodity in the world. Investors were buying as much as they could whilst others took advantage of the rising price and went on to sell the gold they already have.
How did we get here?
There is a crisis in the supply side of things. To understand why this is the case, one has to go back to March when the lockdowns were first instituted. In Mid-March , the spot price of gold was very volatile. The spread at that time was around $200. There was a sudden spike in the market when demand went up as more people began to respond to what was happening in the market. Supply from the mining industry also slowed down because major gold producing countries went on hard lockdown. By the end of March everyone was panic buying and gold dealers were reporting that they were running out of bullion. Many people thought that the market could handle this, however, when international borders began to close mints could not get the gold they needed to make the various products they make. Things turned sour in a matter of weeks. Production wasn’t just affected by the reduction in the gold supply but mints were also shutting down due to the virus scare. Besides the disconnection between the physical price of gold and the spot price, there has also been reports of a disconnect in the London Fix price and the New York gold futures price. Market watchers are reporting that this has brought much uncertainty in the market.
Exercise Prudence in uncertain times
The worst thing that anyone can do in this market is to try and sell or buy gold without doing research, on the market itself and on the gold dealers one decides to use. You need to be more prudent with your money and your gold. No one knows when this will end. Experts might say that we are closer to a vaccine but that does not mean we are any closer to an economic recovery. Right now, governments are throwing “relief money” at the problem. This means they are creating and printing money out of nowhere this will eventually lead to the debasement of fiat currencies.
As a safe have investment, gold rises in value when the economy is in crisis. We are seeing that happen now. It also rises when the dollar and other currencies fall. This is also happening now. The demand has been rising and the uncertainty over sustained supply amid the current situation and when we do come out of it is another factor driving the price of gold up. At the current prices, this might just be the right time to sell gold, however, it might also be the best time to buy gold because of all this uncertainty. There are still a lot of hurdles that we need to go over before we return to normal, but “normal” is a state we are no longer sure of.
If you find yourself needing to sell gold, you need to take time out to learn as much as you can about the gold price. Watch the market, ask questions. Do as much as you can to reach on gold buyers in your area. Find out how long they have been in business, what kind of gold they buy and how they treat customers. The internet is a treasure trove of information, use it.