During the summer of 2020, news organizations began reporting a major rise in gold prices. In August 2020, gold’s spot price reached a record above $2,075 per troy ounce. That surpassed the prior August 2011 high of about $1,900. By comparison, the averages in 2018 and 2019 were $1,269.93 and $1,393.34, respectively. The original article then examined why gold’s value rose so quickly.
How Inflation and Stock Values Influence Gold Prices
Gold prices have commonly been influenced by inflation, monetary policy, and stock-market conditions. When stock prices decline or inflation rises, there can be greater demand for gold. When the U.S. dollar loses value, investors may buy gold because of gold’s safe-haven reputation and international value. The article noted an unusual circumstance: stock prices had not fallen before the 2020 spike, and inflation had not increased. Instead, the Federal Reserve accelerated asset purchases to address COVID-19 effects, increasing its balance sheet from roughly $4.1 trillion to $7.4 trillion. The original article characterized this as an unprecedented rapid expansion of the monetary base. It stated that nearly 100 years had passed from the Federal Reserve’s founding in 1913 before its asset base equaled what was reached in only 12 months. According to the article, the added liquidity weakened the dollar and lifted precious-metals values, particularly gold.
International Relations and the 2020 Spike
The article said economists also attributed part of gold’s rise to international tension, especially between the U.S. and China. In July 2020, the Trump administration requested China close its Houston consulate; China responded by closing the U.S. consulate in Chengdu. With the U.S.-China trade relationship uncertain, including a heightened perceived possibility of war, investors sought gold because of concern about the future stability of the U.S. economy.
COVID-19 and Uncertainty as Contributors
The COVID-19 pandemic was also described as an important factor in gold’s price because of worldwide uncertainty over the illness and its effect on government operations. After initial lockdowns in many countries early in 2020, investors began anticipating winter lockdowns during summer. High coronavirus rates coincided with unemployment, reduced commerce, and increased economic aid.
Although the circumstances behind the 2020 gold spike were unusual, the article argued that every increase shares one element: uncertainty. When investors worry about economic conditions, they often turn to gold as a flight-to-quality or safe-haven investment. At publication, gold was approximately $1,800 in July 2021, and much uncertainty appeared to have eased. The article nevertheless concluded that the 2020 spike appeared to have lasting effects.
When originally published, readers looking to sell gold coins were told Atlanta Gold & Coin Buyers offered competitive rates and transparent pricing for collectors and investors. They were invited at publication to Fill out our form online .
