for those of us who are invested in gold during uncertain times...

for those of us who are invested in gold during uncertain times such as these... IMO well done! you've made a smart investment decision...

Why is gold rising?

Gold is rising for many reasons, with the recent volatility in share markets caused by COVID-19 the primary driver of demand in 2020. Gold is well recognised as the ultimate safe haven asset, and indeed over the last fifty years has outperformed all other asset classes (like cash and bonds) whenever equity markets sell off.

A second reason is related to interest rates. Whenever real interest rates (which factor inflation into account) are low, gold tends to thrive. Indeed, a study of market data between 1971 and 2019 highlighted that in the years when real interest rates were 2% or lower, the price of gold rose by just over 20% on average.

For most investors that’s a far more attractive proposition than keeping money in a bank account earning nothing, even though gold price returns aren’t guaranteed.

A third and final reason is inflation risk, with gold well recognised as a long-term hedge against inflation. Since COVID-19 started impacting financial markets and the economy, central banks have digitally created trillions of dollars.

The United States Federal Reserve for example has increased their balance sheet by over USD 3 trillion since late February 2020.

For as long as this continues, investors will rightly feel nervous about the potential for higher inflation with gold set to benefit.