What’s next with the gold price?

In times of crisis, the demand for gold increases regularly because the precious metal is considered a haven for many investors. This was also evident during the corona pandemic. The gold price rose by almost 25 percent in 2020 and reached a historic high of 2,067 US dollars (around 1740 euros) for the troy ounce on August 6. Despite falling twelve percent in March 2020 as the pandemic outbreak rocked the markets, gold prices rebounded and ended the year as one of the best-performing assets, despite many stock indices making or exceeding all-time highs. What will happen to the gold price in 2021? Is it worth investing in?

Gold Price Development in 2021

After the gold price rose sharply in the first days of 2021 and climbed from 1898 US dollars at the end of 2020 to over 1950 US dollars per troy ounce, the gold price fell again shortly afterward. In the first days of March 2021, the development accelerated. The setback in the price of gold is mainly explained by a recovery in the US dollar.

Even last year, the gold price was by no means continuously up, but there were large price fluctuations. According to the World Gold Council, the annualized volatility of the gold price reached 20 percent in 2020, its highest level since 2013, and was thus well above the long-term average of around 16 percent. However, the volatility of most assets has increased over the past year.

The corona pandemic could ensure that many investors continue to bet on gold in the New Year. Against this background, the gold price could rise again in 2021. Positive news from the economy, however, regularly dampens the demand for gold and thus depresses the gold price.

Gold in Crisis

Gold is a rare commodity. That is why it has been in demand as a raw material or medium of exchange for thousands of years. With a gold coin, the owner always had something valuable in hand, regardless of the age at which he lived. In ancient Egypt, in ancient Rome, or the 21st century, gold was and is accepted always and everywhere. And in contrast to other asset classes, gold always remains worth something. The price of gold has never dropped to zero. In contrast, investors who have chosen the wrong bond, share, or currency have already suffered total losses.

When times get particularly restless and there is great uncertainty about how the economy and share prices will develop, many investors "take refuge" in gold-and the price of gold rises because gold reserves are limited. However, since gold has decisive disadvantages as an asset class, the trend will reverse again as soon as the overall situation calms down and the economic outlook improves. Then the gold price falls again-as it does now. This also shows that gold is not an investment with regular returns, but a speculation on the gold price.

Should I invest in Gold?

At best, experts recommend gold as a stabilizing addition to an investment portfolio-in the order of ten percent of the investment amount. Because the gold price often moves in the opposite direction to the stock market, gold can slightly weaken the fluctuations in the portfolio. What is decisive, however, is what you hope for from an investment in gold: If you fear a currency crash or the total loss of your other investments, you can invest a small portion of your assets in gold.

Those who neither want to invest their money in coins and bars nor take the risk of betting on a single share can participate in the development of the gold price via an exchange-traded investment fund.