The price of gold has experienced considerable ups and downs during this atypical year 2020: a fall in March that interrupted the upward path, to then start a rally that took it to its all-time high in August, and then fall below $1,900 an ounce .
Despite this, the trajectory is clearly upward and it is estimated that it will close the year with a revaluation of 25%. The conclusion that we can draw from this behavior of the precious metal is clear: gold is an asset that offers its best qualities over long periods of time.
“What’s wrong with gold, that it’s in the doldrums?” or “Didn’t you say that gold was going up? Well, yesterday it lost xx dollars!” .
Those of us who follow the news of the gold market on a daily basis are familiar with a figure that we could describe as ‘the short-sighted’ : a person who, although he consults the daily price of gold daily, is not familiar with the peculiarities of this market and simplifies its operation. at the price level, just as if it were the price of a stock.
It is necessary to explain to this type of interlocutors that gold is a very simple asset and that it has multiple advantages, such as its ability to maintain purchasing power, protect against inflation and constitute a refuge in times of crisis. But that is not the most appropriate to earn easy money and, above all, fast.
Crisis and short-termism
Just a few days ago, the director of External Relations of the World Gold Council , John Mulligan , published a post on the blog of this organization, Goldhub , in which he addressed this controversial issue of short-termism in investing in gold, after detecting a worrying lack of long-term vision in the media that contact them.
In his post, Mulligan expresses his fear that the Covid-19 crisis, the great financial crisis of 2008 or the European sovereign debt crisis that followed it have almost wiped out strategic thinking or long-term vision among analysts and media, which seem to pay attention only to immediate movements and their impact on the price.
As the executive of the World Gold Council explains:
“After each crisis we witness a relatively rapid return to risky assets, but with doubts as to whether risk appetite is a sign of real recovery, with rational expectations, or rather a reflection of ‘tunnel vision’ ‘ and short-term optimism” .
An opinion that reflects what a lot of people think about the financial markets: that the desire for a quick exit from the crisis and an excessively short-term vision prevent the adoption of security measures to prevent this situation from happening again. Some security measures in which precious metals and, particularly gold, have a lot to say.
Gold and long term
As they defend from the World Gold Council, the precious metal works better as a long-term investment because it is acquired by many more people, in many more countries, for many more reasons than any other investment asset. Precisely, the countries that buy the most gold (China and India) are the most populous in the world, with the fastest growing economies and populations that are rising out of poverty and increasingly have higher incomes, as well as a cultural affinity with gold that stretches back many centuries.
