Gold Emerges As Rare Pandemic Safe Haven
Investors across the world bet on gold as a safe haven during the ongoing pandemic. The spot price of the metal dipped initially, but has regained its value and now trades higher than it did at the end of February.
The spot price of a single ounce of gold has climbed from $1,500 to $1,732 over the past six months. Meanwhile, the S&P 500 has declined 10% over the same period. Exchange traded gold funds, such as the iShares Gold Trust, have also outperformed the stock market year-to-date.
Gold mining companies have performed even better. Barrick Gold Corp, the second-largest gold mining company in the world, has seen its stock price surge 56.88% year-to-date.
“Gold is a way of going long on fear,” renowned investor Warren Buffett once said in a letter to shareholders. Fear has been abundant in recent months. Much of the global economy remains shut due to the pandemic and the long-term consequences of this unprecedented move remain unclear. Experts, including Bank of America and Ray Dalio’s Bridgewater Associates, see plenty of risks ahead and predict higher gold prices for the rest of 2020. BoA’s price target is $3,000 by 2021.
Investors seem to be adding the precious metal. Swiss exports of gold to the United States surged from 361 kgs in February to 43.2 tonnes in March — by far the biggest monthly total on RECORD, according to U.S. customs data. Up north, the Ontario Teachers’ Pension Plan signed a US$300-million investment deal with New Gold Inc. to acquire a 46% free cash flow interest in the New Afton gold-and-copper mine.
Besides investors and pension funds, central banks seem to be betting on the precious metal as well. Global central bank gold reserves reached 650 tonnes at the end of 2019, the highest level of purchases in 50 years, according to the World Gold Council. Central bankers seem to be using the metal as a hedge against currency devaluation as well. “You can print money but not gold; there are supply limitations,” Bank of China International analyst Xiao Fu, told Reuters.