For a long time, Gold has been considered a safe investment that guaranteed profitable gains. However, from August 7, 2020, when gold prices closed at its highest rate of Rs 57,008 per 10 gram, to last week on February 26, 2021, the price of gold fell by Rs 11,409. Meanwhile, silver metal, which had peaked at Rs 77,840 per kg on August 7, 2020, went down by ₹10,421 to Rs 67,419 on Friday. So how safe is it to invest in gold and silver in 2021?
According to Hindustan Times, the national secretary of the India Bullion and Jewellers Association (IBJA), Surendra Mehta has said that the major reason for the drop in gold prices was the strengthening of the dollar against other big currencies in the market. The US dollar and gold are inversely correlated and therefore, when the demand for the American currency goes up, the price of the gold metal goes down. The value of US bond yields have also grown causing a correction in gold prices.
With the coronavirus pandemic hitting the global economy, people are now investing in risky options to yield stronger profits, for example the rise of cryptocurrency like BitCoin, or Dogecoin. Speaking to Hindustan Times, Mehta also mentions that people are also exploring their options in investing in riskier assets like equities and cryptocurrencies. Remember the surprising rise of GameStop stocks in January this year. However, Mehta says that these sudden spurts of profit are most likely to be short-lived and people should use this as an opportunity to bet on e-gold.
The report mentions that the current rally across assets such as equities is powered by liquidity and is not going to last long. When the equity market corrects itself, people will once again turn to gold as it is considered one of the safest assets. It is expected that the gold prices will rise once the US announces its another round of stimulus packages.
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