The Gold Rally May Have Just Begun: 5 Top Picks To Tap It

The global economy is set to remain coronavirus-stricken in this year. Although, in April-May, stock markets of most of the countries recovered most of the ground that they lost in February-March, the global economy has a long road to go to reach to the pre-pandemic stage. The U.S. economy is not an exception.  

Meanwhile, economic devastations and the resulting market turmoil have gone well with precious metals, especially gold. The price of the yellow metal — an important safe-haven investment opportunity — was settled at $1,820.60 per ounce on Jul 8, the highest since Sep 14, 2011.

Year to date, the Dow and the S&P 500 indexes have declined 9.9% and 2.4%, respectively. The tech-heavy Nasdaq Composite is the sole major stock index which is in positive territory year to date with a gain of 17.6%. On the other hand, gold price has rallied more than 18% year to date. The momentum of gold is likely to continue this year due to reasons mentioned below.

Accommodative Monetary Policies

Almost all central banks are pursuing easy monetary policies in order to inject more liquidity into the system. The Fed has reduced the benchmark interest rate to zero and intends to maintain 0% interest rate and asset buyback programs till 2022. The ECB and the Bank of Japan are maintaining a negative interest rate policy for a long time.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion, making gold cheaper for investors holding other assets. Moreover, globally, major central banks have strengthened their quantitative easing programs. Low interest rate and higher money supply will depreciate the value of currencies of these countries. A weak U.S. dollar will increase demand for dollar-denominated bullions like gold.

Concern Over Resurgence of Coronavirus Cases

Wall Street's impressive V-shaped recovery from the coronavirus-led bear market and the formation of a new bull market suffered halts in the past three weeks owing to a second surge in the COVID-19 outbreak.

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Laurent Eliane 4 weeks ago Member's comment

May be there is a little potential up for gold miners but the risk now is too high. I would not recommand any gold miner unless you go with the ones who has the mines only in canada. We can head very soon, if a collapse of some currency, that government around the world will seized the mining company. And they will as ban having physical gold. The consequences of nationalism, closing border, collapse of the WTO, this is the path of having physical gold only and being very, very careful with gold miners.