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Gold Stands Ready for 2021 Turbulence

Tuesday, January 12, 2021

At long last, 2021 is here, but the prospect of a new year doesn’t guarantee the end to all of the issues which dominated our lives in 2020. Rather than turning over a new leaf, key warning indicators continue to flash red, suggesting trouble ahead and the possibility for gold to continue rising.

The reasons are various but all come down to an obvious source: COVID-19 and the efforts to keep a lid on cases, as the pandemic continues to spread across the world. Learn what this could mean for gold prices.

The cases continue to mount

As years go, 2020 was one of the most intense ever for many of us. As many as 75,000 people lost their lives to COVID-19 in the UK in 2020, as health services were overwhelmed by rising cases and a shortage of beds and ventilators. Cases bottomed out in the summer, only to resume a grim upward trajectory as part of a second wave in the autumn.

Now, as we enter a new year, a new strain of COVID-19 has emerged, making the disease more easily-transmissible across the population. As a result, case numbers have spiked since December 2020, and pressure is returning to our hospitals. Until a vaccine has been distributed as widely as possible, the UK is returned to a state of lockdown restrictions, crippling the economy yet again.

Gold, which often rises during times of instability, spiked last summer to a new all-time high of £1,500 per troy ounce. News of vaccines becoming available caused a brief dip, but now prices have bottomed and could continue their long-term upwards trajectory, as cases and deaths mount in this new wave.

The cases and deaths are the more obvious headline figures to watch, when it comes to predicting which way things could go, but there are also compelling reasons to buy gold in the coming weeks, especially when you consider the fiscal policy responses to the pandemic.

Stimulus risks stoking inflation

As we wrote previously, policies put in place to prevent an economic downturn could risk putting upward pressure on inflation. The UK Government expects to see out the financial year in March 2021 with a record-breaking budget deficit worth hundreds of billions of pounds, as a result of a drop-off in tax receipts and the government stepping in to subsidise wages for businesses without the means to generate income.

This fiscal spending spree is matched by a large influx of cash from the UK’s central bank, the Bank of England.

The Bank of England is stepping in on the monetary side, creating billions of pounds through quantitative easing, to buy up government bonds and keep interest rates lower for longer to encourage consumer spending. History tells us that when the economy experiences such a large injection of cash in such a short period of time, inflation tends to pick up shortly afterwards.

For the wider economy, rising inflation means smaller pay packets in real terms, and effective negative rates of interest for savers, unless rates rise sharply to offset the price rises. The gold price, on the other hand, could benefit enormously from this stagflationary climate, just as it did in the 1970s. The Gold Bullion Company has been looking at gold’s seemingly unstoppable price rally since 2015, where it has effectively doubled in value.

Much of the recent price action has been occurring in the last two years alone, suggesting some of the greatest gains could be had in the coming months, especially if inflation numbers surprise to the upside. As gold prices tend to move in a parabolic pattern, it makes sense to keep an eye on prices for that upward lurch in the coming weeks with our Live Gold Price tracker.

Crowded field benefits gold

A flight of cash into the stock market and the bond market since March 2020 has taken both asset classes to high valuations, crowding out investors from finding affordable investments down the road. If you seek a bond which matures in 10 years, your returns would be close to zero. As for the equity market, it appears increasingly like a rally climbing a wall of worry. All it takes is one wrong move, a bit of bad news and the markets could tumble again.

This could be the catalyst for a greater surge in gold prices in 2021. As other assets fizzle out and their winning streak comes to an abrupt end, gold is ideally placed to rise substantially. Significant concern remains about the sustainability of a recovery, given the ongoing restrictions to stem the tide of COVID-19 cases.

The rush to buy gold means it has become more important than ever to find a trusted gold seller with an attractive stock of bullion products for dispatch. The Gold Bullion Company has been helping buyers in this capacity for a number of years, and we haven’t allowed COVID-19 to stop us from delivering high-quality gold coins, bullion bars and other precious metals items straight to our customers’ doorsteps.

In fact, demand is so high that dispatch can take between 3-5 days at present, as we return to operations in the new year.

The good news is that not only do we provide products straight to your own home, but The Gold Bullion Company also offers facilities including VAT-free storage for silver bullion, to keep costs at a minimum while giving investors the opportunity to participate in the precious metals markets.

Rest assured that, if you choose this option, your item is safely stored in a secure vault at an undisclosed location in the UK.VAT only comes into play, if you should choose to have your item dispatched from the LBMA vaults.

If you have any burning questions or wish to make a purchase with The Gold Bullion Company today, please feel free to call us on 01902 623 259. Our team looks forward to helping fulfil your needs as 2021 kicks off with a bang.