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GOLD GAINS MOMENTUM AS INVESTORS SEEK SAFETY AMID GLOBAL PANDEMIC UNCERTAINTY
The outbreak of the worldwide Covid-19 crisis sent shockwaves through global economies and financial markets. Heightened political instability and economic disruption pushed many investors toward traditionally defensive assets. In this climate of uncertainty, gold has once again strengthened its reputation as a reliable store of value, offering protection against volatility and serving as an effective tool for portfolio diversification.
Gold investments in 2021
WHY INVESTORS CONTINUE TO TURN TO GOLD AMID MONETARY EXPANSION AND MARKET UNCERTAINTY
Many portfolio managers maintain that dedicating a portion of capital to gold is a sensible strategy, particularly during periods of heightened global instability. And in recent years, stability has certainly been in short supply.
According to investor Lyn Alden, founder of Lyn Alden Investment Strategy, gold and gold-related equities tend to perform well in environments where money supply is expanding and interest rates hover near zero. That backdrop has largely defined the post-2020 economic landscape, as central banks introduced unprecedented stimulus measures to support struggling economies.
Historical trends highlight a strong positive relationship between U.S. money supply and gold prices. When large-scale monetary expansion weakens the U.S. dollar, gold often moves higher. In such conditions, accommodative policies from the Federal Reserve can act as a supportive tailwind for the precious metal.
Gold has been in an upward trajectory since 2019, advancing by approximately 25% from the start of 2020 at the time of writing. Still, some analysts believe the rally may not be over. In mid-2021, commodities analyst David Lennox of Fat Prophets suggested in an interview with CNBC that accelerating U.S. inflation — fueled by rapid monetary growth — could push gold prices even further.
That said, not everyone shares a bullish outlook. Some market participants argue that as global risks begin to ease, demand for defensive assets like gold could soften, potentially leading to price declines.
It’s important to recognize that no analyst can predict future price movements with certainty. While economic indicators offer insight, gold remains subject to volatility and a variety of macroeconomic influences. For this reason, disciplined investors often rebalance their portfolios over time — trimming positions after significant gains and reallocating capital toward undervalued assets.
However, portfolio rebalancing decisions should not rely solely on market prices. Factors such as tax implications and transaction costs also play a crucial role and should be carefully evaluated before making adjustments.