Gold has Broken the $2000 Resistance, Where Does it go From Here?
March 15, 2022 (Investorideas.com Newswire) In the past decade gold has been relatively stable, until recently recording a major spike. The metal asset is seen as a safe haven, being a commodity that will always have value. Historically, wars and financial crises are reasons for investors to buy gold. Today it is no different, with the asset being traded at over $2000 an ounce mainly because of the war in Ukraine.
Russia's invasion of its neighbour, Ukraine has shocked the world. The world order is being shaped in front of our own eyes, with other ex Soviet Nations looking on in despair. The invasion has larger global repercussions, especially with the West's attempt to isolate Russia. Major drastic actions have been taken to sanctions Putin's government. Firstly, oligarchs have had their assets frozen and travel restricted, but most importantly Russia has been kicked out of the financial system. Payment companies have withdrawn like Visa and Mastercard, meaning worrying times ahead for Russian citizens. Moreover, Russian banks have been kicked out of the SWIFT system, making international payments difficult. The uncertainty in Russia and elsewhere has therefore driven up the gold price as investors flee to safety. Another interesting development was the surge in Bitcoin, which is also looked upon as a safe store of value. Crypto exchanges however, have not restricted their products to Russian citizens.
Confidence in governments is at an all time low, especially with the way how the COVID pandemic was handled. War just compounds the issue, so the next decade should be very rosy for gold. As Omicron has peated out, many governments have lifted restrictions, allowing for free travel. Nonetheless, this is mainly in Europe, with several Asian countries such as Hong Kong and Thailand experiencing spiking cases.
Gold has always been very popular in Asia, in particular India as it is culturally significant as well as a safe store of value. One drawback to gold is that it could be seized by the government, just like it was in the US in the 1930s. Many things around the world are prohibited, from cryptocurrency in China to online gambling in Thailand. Yet, with the latter, individuals can use VPNs to access their favourite table games. To help, online gambling portals such as Asiabet assist with finding the best welcome bonuses and write thorough, unbiased reviews. Additionally, the platform advises on what payment options are accepted.
Gold thrives off fear, when people are scared, they buy and hoard, and when confidence is high, gold is sold off. But the past few years have been scary times, seeing monumental changes. If these trends continue, it's hard to see gold going lower. Furthermore, in trading charts, gold is in a very similar position as it was just before 9/11. It is looking at a major breakout especially after it has been neglected for the past decade.
As gold is a precious metal that is exceedingly rare, an upwards trend will lead to more explorations. A higher price in gold will lead to more investment in the industry. This in turn will provide jobs in some of the poorest places in the world. The industry is controlled by huge multinational companies as the barrier to entry for digging gold is very high.
Gold is not the only asset class surging, the same is happening to oil and soft commodities. As a direct result of the Russia/Ukraine war, oil is at the highest price in decades as well as grains such as wheat and soybean. If softs are on the rise, this ultimately means higher food prices, and with oil, on the rise, it pushes up the price of almost everything. Another major concern is that of inflation, also being its highest in years, whilst wages remain the same.
Overall, there are many factors that make gold's outlook very positive. Unfortunately, war is always good for gold and general confidence in the financial system is at an all time low. Some scholars are even calling for a reintroduction of the gold standard to stabilise the economy. Whatever happens in the next few years, gold will still be a good buy, just as it has always been.
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