Worries over the devastating impact of the coronavirus pandemic and the response of monetary policy authorities are driving a modern gold rush with demand soaring for gold and financial investments tied to the precious metal. Gold-backed exchange traded funds added nearly 300 metric tons of the precious metal during the first quarter, driven by net inflows of $23 billion, a record quarterly jump in assets, according to the World Gold Council.
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“Everyone wants to reexamine gold and it’s not a fringe asset anymore. We’ve been run off our feet,” Sprott Inc. CEO Peter Grosskopf told Bloomberg News. Sprott, a Canadian-based global asset manager, is a leading manager of gold investment funds, with $11.5 billion of assets under management.
Highly volatile stock markets have reminded investors of the need to balance portfolios with assets like precious metals that have a low correlation to equities.
As demand grew with the pandemic’s spread and the shuttering of the economy, the price of gold soared $300 an ounce from mid-March through mid-April.
Adding to the safe haven trade is the aggressive response of central banks, particularly the Federal Reserve, to prop up the economy by injecting cash into the financial markets, and the U.S. Treasury’s effort to support businesses by distributing forgivable loans.
“You do not need to be a gold bug to believe that gold is the right move to hedge yourself against the financial system right now,” Grosskopf told Bloomberg. “We’ve entered into an environment of the monetization of debt and the debasement of currency, and all of these governments believe they can control that process; history suggests that they cannot. Gold is the way to hide from that.”
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