The message behind gold's rally: The world economy is in trouble
It’s easy to forget now, but there was a time early in the pandemic when the price of gold was in free fall.
It was a curious thing, what with the coronavirus sparking a collapse in the global economy, and it would prove in time to be one of the great head-fakes in the recent history of financial markets, for the pandemic of 2020 would soon show itself to be the driving force behind one of the most ferocious rallies the gold market has ever seen. At the close of trading in New York on Friday, bullion had risen to $1,902.02 an ounce, some 30% higher than the low it hit in March and just 1% off a record high set in 2011.
The pandemic has unleashed a torrent of forces that are conspiring to fuel relentless demand for the perceived safety from turmoil that gold provides. There’s the fear of further government-ordered lockdowns, politicians’ decision to push through unprecedented stimulus packages, central bankers’ decision to print money faster than they ever have before to finance that spending, the plunge in inflation-adjusted bond yields into negative territory in the U.S., the dollar’s sudden decline against the euro and yen, and rising U.S.-China tensions.
All these things, when taken together, have even triggered concern in some financial circles that stagflation — a rare combination of sluggish growth and rising inflation that erodes the value of fixed-income investments — could take hold across parts of the developed world.
https://www.latimes.com/business/story/2020-07-26/gold-rally-global-economy
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