In this testing time of COVID pandemic, where we are mainly hearing news about unemployment, job cuts, business losses, and market crashes, gold seems to be performing beyond everyone’s expectations. Barring some corrections here and there, gold price looks very bullish now and is showing signs of going even further up.

This obviously has made analysts and other experts to think and find out the reasons for this unprecedented rise in gold prices. What factors led to this phenomenal increase in gold prices? Why did gold become the preferred investment for people around the world? Is this a short-term phenomenon? Will it continue to rise even more? Or will it fall down drastically? These are some of the questions that they are trying to answer.

Blessing in Disguise

While it is true that the pandemic has pretty much put all economies in back foot, there are few areas that actually benefited from it – something like a blessing in disguise. Let us analyse this in detail.

Due to the COVID pandemic, governments are forced to put the economy under lockdown. As a result, there is not much economic activity happening. There is less demand for goods and services other than essential items. This brought production to negligible levels. Industries are down. People lost their jobs, which in turn affected their purchasing power. Now they are not ready to spend for anything other than bare necessities. Thus, markets are down. This has resulted in the performance of shares in the share/stock market. Currency rates have also taken a hit. Therefore, there is fear among people that markets may crash at any time and they may not get back even their capital invested. This is forcing them to consider alternatives. They are not ready to invest in currencies as the pandemic is global. Not only individual investors and traders, but large institutions are also thinking along the same lines. Finally, they cut the Gordian knot by rerouting their money to buying the yellow metal – gold. This is what shot the gold prices high up to the sky. And in light of the uncontained pandemic, this trend is expected to continue for some more months.

Geopolitical Tension

Another significant factor that influences the price of gold is geopolitical tension between two giants like America and China. People are now closely keeping a watch on the happenings between these two countries. They are speculating about trade wars and even the possibility of an actual war. Trade uncertainty is one thing that they are afraid of. In the event of a war, it will affect trades, thus crashing the share markets. Similarly, the value of US currency will also get affected, leading to a crash in forex market. Hence, they are forced them to move their investment to safer options like gold.

These are the fundamental factors that are escalating gold price. Now let us look at some of the technical factors for the same.

Look at the waves for the last four continuous weeks.

Those who are trained to read charts technically can understand the movement of price based on the candles shown in the chart.

As can be found from the chart, for one continuous month, gold prices were going up and down. Based on the price movement, our analyst, Mr. Mithun Girish, had identified a particular price action pattern called “Bullish Fakey” and had predicted an upward surge in gold prices up to 1765.

Now look at the next chart given below:

As you can see, the price did go up exactly as predicted by our analyst! This accurate prediction was possible by considering both fundamental and technical factors as discussed above.

Now take a look at the next chart where our analyst predicted an even further surge in gold prices. This time, the prediction was up to 1795!

As predicted by the analyst, the price did indeed reach 1795.

If this trend continues, then gold price is expected to break all previous records and cross the $2000 mark in the near future!

Conclusion:

The message is loud and clear. The world is in unchartered waters right now. There is fear among people that the world is heading into darker times. And when you have a pandemic of this magnitude, the fear of investors and traders would get fuelled by speculations, persuading them to find safer havens. Hence, this could be the most explosive phase of gold.

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About Author

Mithun Girishan is the founder of MMM (Mithun’s Money Market), a consulting firm providing quality training programs in capital markets. He is an investor, trader, coach and a continuous learner. In addition, Mithun provides consultation and mentorship to many retail investors and company directors across the globe for investments, trading and hedging their wealth in stocks and futures. His passion lies in exploring new avenues in financial markets as well as learning theoretical and practical economics and its application in daily lives. This has exposed him to a wide range of markets spanning from equity, commodity, forex, futures to options.

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