Those who remember the global financial crisis will know only too well that for years afterwards one of the few groups of people who could regard themselves as winners were those who held gold.
What is less well remembered is that right at the start of the financial crisis gold dipped significantly, as investors looking at huge losses elsewhere looked to mitigate the pain. It was only after that first wave of selling that gold then began the relentless upward trajectory that was eventually to take it within an ace of US$1,900 per ounce.
The current price stands at just over US$1,600 per ounce, more than US$100 higher than it was earlier in the month as traders fulfilled the same pattern and booked gains on gold to cover losses elsewhere.
The recovery is now well underway, and yesterday gold came close to the US$1,650 mark before falling back again as short-term investors booked gains, and those still in the market with losses to cover took advantage of the renewed strength.
From here on in though, with the distressed sellers out of the way, gold will be free to perform its traditional safe-haven function.
As in the last crisis, the attractions of the gold safe-haven will work on two levels. First, there is the known durability of gold as a currency in its own right. The exact calculations are somewhat vague, but it’s generally accepted that by and large gold has retained its purchasing power down the ages. Ross Norman, from bullion dealer Sharps Pixley, argues an ounce of gold has always been able to buy a man a properly tailored suit, for example. But there are countless other ways of reckoning it.
Whatever your metric, there’s no denying that other ancient currencies, from beads to the Chinese cash, have not had the same staying power.
Which brings us on to gold’s second level appeal during the current coronavirus chaos: with governments pushing stimulus and quantitative easing buttons all over the place at the moment, the relative value of all currencies is likely to decline, including the mighty dollar, which as the currency of global trade is holding up better than any other.
But the Fed, and in particular Donald Trump, are mindful that that strength gives the US a competitive disadvantage in global export markets, and will certainly seek to weaken the dollar over the coming months. Since gold is priced in dollars, that inevitably means an increase in the dollar value of gold, and anyone who’s holding it now – or even better, has been holding it for the long-term – is likely to end up a winner.
The picture can be different in other currencies. But it’s worth noting that gold is at record highs in terms of South African rand, the Australian dollar, the Canadian dollar, and the British pound. The price in euros hit a record just a couple of weeks ago.
This level of interest is being reflected in the levels of business being done by bullion dealers like Sharps Pixley, and by gold trading platforms like Goldex.
Gold trading volumes on the Goldex platform - https://goldexapp.com - are up 125% so far in 2020 compared to last year. Month-on-month comparing March 2019 to this month the amount of gold buys and sells has increased by 1,600% with one week of the month still left to go.
Overall Goldex has seen a substantial increase in gold demand in the first three months of the year, with this month already surpassing the company’s previous record, set as recently as January 2020.
The company is also seeing a significant increase in customers, with user registrations up 35% since the beginning of the year.