Since then, until 1970, that is, in 713 years (!), The yellow metal has risen in price by only 9 times, reaching the level of 35 dollars (at this mark, the gold standard was canceled).
At the same time, over the past 50 years, an ounce of gold has increased in value 53 times, which can be explained by one simple fact, namely the existence of paper money, which is no longer backed by physical precious metal.
Under the current dollar standard, rising inflation is common, supported by loose monetary policies from central banks. Hence the rapid rise in prices for the yellow metal.
This year, gold has risen in price by 25%, from 1515 to 1900 dollars per ounce. It has every chance of surpassing the 2011 record, $ 1,923 an ounce, which was recorded amid the global financial crisis caused by the need to inject several trillion dollars of "cheap money" into the economy. What is behind the current record rally?
Since the beginning of 2020, the whole world has been in a fever from the consequences of the COVID-19 coronavirus pandemic, which has worsened the already not rosy economic forecasts. According to the IMF, the global economy will shrink by almost 5% this year. The US stock market indices are at record levels, as traders expect new measures of fiscal and monetary stimulation of the economy from the authorities, in a word, "cheap money". The zero / negative interest rate regime is already considered the “new normal”.
In such conditions, the yellow metal cannot but rise in price. Investors buy the precious metal because they know that the rally in the stock markets will stop if the flow of “cheap money” dries up. The American economy and the stock markets of this country are "on the needle" of stimulus measures. The same can be said for the EU, where a second batch of record-breaking incentives worth almost $ 1 trillion were agreed. euros in the form of subsidies and cheap loans.
The popularity of the precious metal as a protective asset is also explained by the renewed geopolitical tension. The conflict between the United States and China is turning into a hot phase: the countries recently exchanged consular closings. All this is happening in the atmosphere of the second wave of the pandemic, from which the United States, countries of South America, Africa and Asia are suffering. As a result, investors' hopes for a V-shaped economic recovery have already practically evaporated, as partial quarantines have been introduced in some leading countries. If ten years ago the world was shaken by the economic crisis, now we are talking about a coronacrisis, a combination of a natural cataclysm and a decline in economic growth.
In such conditions, as predicted by leading investment banks, the precious metal rate may reach $ 2,000 per ounce by the end of summer. This will be a predictable and logical consequence of the 50-year history of the world economy based on the paper dollar standard.