The global economy is still reeling from the impact of COVID-19. The monetary stimulus from central banks worldwide has yet to show significant results, leading to increased volatility in risk assets and a flight to safe-haven assets like "gold," causing prices to surge rapidly. But what does this phenomenon reflect? And what are the trends moving forward?

The ongoing outbreak of COVID-19 is still a major factor affecting the global economy and many countries, with global infection numbers surpassing 18 million and expected to reach 20 million soon. This implies an increase in the death toll as well.

The second wave of outbreaks in many countries, especially the United States, Brazil, and India, has further delayed economic recovery. Various economic activities have been heavily impacted, including airlines and tourism, although some sectors like domestic consumption are starting to return to normal.

However, a key point to watch is the ongoing monetary stimulus from central banks worldwide, which has yet to show positive effects on the economy. What is evident is that risk assets are becoming volatile, leading to sell-offs and a rush into safe-haven assets like gold. It was somewhat predictable that during an economic crisis, gold would become an opportunity.

We have seen gold prices soar above $2,000 for the first time in years. What does this indicate? It shows a greater demand for safe-haven assets over riskier investments. However, the rapid rise in gold prices also reflects other factors. What are the trends? Is it a good time to invest? What factors should be considered?

The adjustment in gold prices reflects a lack of confidence in the global economy, as well as trade war disputes and political conflicts between the U.S. and China. Additionally, various currencies have weakened due to significant monetary injections in the past, leading some investors to choose gold as a means to preserve the real value of their wealth.

When will gold prices reach their peak?? It must be noted that gold prices primarily move according to market supply and demand. However, it is expected that gold prices will continue to trend upward throughout 2020, considering the global economy is projected to slow down until the end of 2020, along with ongoing liquidity injections from central banks that will continue into next year.

A crucial point to monitor that will affect changes in gold price direction is the control of the COVID-19 outbreak and the research on vaccine production. This will impact gold prices when effective vaccines are produced or herd immunity is achieved among the majority of the population, which is expected to occur after the second half of 2021.

So, what should investors do regarding gold investments?…?

Gold is viewed as a safe-haven asset during economic troubles, making risk assets less appealing. However, the demand for gold has driven prices up significantly, which could also pose risks. Therefore, in the short term, gold prices above $2,000 require caution when buying. It is advisable to consider taking profits and looking for opportunities to accumulate when prices correct.

For the medium to long term, it is expected that gold will continue to rise until 2021, so long-term investors are advised to allocate a portion of their investments to gold to hedge against risks from trade wars and declining confidence in major currencies.

In summary, gold is considered a high-risk alternative investment. Investors should include it in their portfolios to reduce risk and should not allocate more than 5-10% of their total investment portfolio to it.

Opportunities for investment during a crisis are always present. Investing when opportunities arise or waiting for the right moment to invest can be done, depending on individual preferences. However, regardless of the asset, it is essential to find opportunities for profit while also managing risks to achieve successful investments.

SOURCE : www.bangkokbiznews.com