Both are in proportion to money creation, which is at record levels, with no sign of slowing down. According to Bank of America experts, rising inflation, ongoing pandemic risks and geopolitical conflicts are contributing to investments in gold. The global situation is expected to become even more tense, and this could be another potential tailwind for gold, which is considered a safe investment in times of uncertainty. Although the supply of gold is very stable, world events involving gold can vary significantly and cause the price of gold to change
To learn more about investing in gold and silver and what could lie ahead, particularly for fiat currencies, download Mike Maloney’s bestselling Guide to Investing in Gold %26 Silver for free. Coronavirus relief packages and periods of economic recovery led to a fall in the price of gold, while rising inflation, the spread of the pandemic and geopolitical tensions made investing in gold significantly more attractive. Most novice gold investors believe that if inflation rises in the US, the price of gold should rise too, as more inflation dollars must be paid per ounce. Volatility is rising significantly, which is due to exogenous market shocks and individual events, which increases investment demand for gold and gold-back ETFs
The actions taken by these participants can significantly change the demand for gold jewelry and investment instruments. Extracting and refining gold is a very labor-intensive process, meaning that the annual gold supply is increasing very slowly and steadily, so there are no surprises on the market. If we place the Fibonacci grid over the gold price pattern, we will experience several development phases over the lifetime of the gold trend. For a general understanding of market balance, you need to know that most gold demand is more or less evenly distributed between investment instruments
Gold is best suited as a safe investment in times when investors are afraid and regional conflicts may well lead to such market conditions. As an example, the following shows that China and India (with strong economic growth) have become major buyers of gold in the last two decades to invest and build up reserves, and that they have therefore provided additional impetus for price increases. So if the exchange rate of one of the currencies (e.g. the dollar) loses value against the other reserve currencies, while purchasing power is maintained when buying gold in other currencies, the logical consequence is the increase in the price of gold in relation to the devalued currency. Gold is not only known as a portfolio diversifier, but in light of increasing inflation fears, investors are also tending to turn to gold as it is
considered a good hedge against rising prices.
Your decision to invest in gold should be based on your risk tolerance, investment objectives, portfolio composition, and market experience.