Could Gold Prices Re-do The 2009-10 Recession Curve?

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Global gold prices are a sensitive measure of performance levels of the global economy.

Trading has risks, just like any other business.

And expert traders are always on the lookout for opportunities to go short or long.

Gold sits in a unique position globally. On most occasions, gold is used as a barometer as to how the global economy is doing.

Right now, the global gold market is racing past $1750.00, according to JM BULLION.

Recall back when the surprise COVI-19 started hitting China(November 2019), the charts went down to as low as $1450.00. Right? Massive pullback. It is the uncertainty with global markets.

However, drawing from the 2009-10 collapse of the global markets, gold stabilized again.

Why is Gold So Sensitive to the Global Economy?

Kenneth Rogoff notes that gold in the global market has recovered up to the past 300% over the last ten years.  It’s no doubt inflation will unexpectedly like Corona-virus spiral upwards into uncertain limits.

The main reason Gold prices sway rapidly within bullish and bearish markets significantly relies on the global economies.

In the most uncomplicated notion, gold is a yardstick of the global economic performance, summed up into technical and sentimental musings.

When stocks plummet, investors rush to purchase gold. And the result is a bullish effect.

Conversely, when the stocks do well, the same investors rush in to sell it and plough back into the stocks. It’s a see-saw puzzle.

The economic sentiments at a global level have numerous metrics dictated by both timing and actions of central banks and hedge funds managers. In essence, the rise and fall of gold prices resonate with the actions of the stakeholders/parties above.

The timing for an ordinary investor is critical and laced with long waits and inferences with seemingly finite and infinite spells.

gold prices chart by jm bullion

Trading Volumes and Time

In a nutshell, traders can get nuances based on historical data. Unfortunately, the future always remains an unpredictable spell when it comes to investments.

Who knew that COVID-19 would push the globe this far? Yet, it remains uncertain with new waves of infections and unpredictable global and government reactions towards coping with everything.

Although some governments have chipped in with massive bailouts for businesses and individuals, the long term effects remain unclear.

Pullbacks – A Traders Nightmare

Trading and any other business will face hard times. As for traders, prices will remain on the move.

Adverse pullbacks remain a nightmare for any trader. There are instances when they have struck market movers. Lucky few have had governments come in to bail them out.

What trend will the global Economy and prices of Gold take?

One critical note for investors is if gold will re-do the prices it did in 2009 -2011 recession spells.

It’s been six months into the pandemic, and it seems investors are for gold.

As we close the first half of June 2020, gold prices are just 2000 pips shy from the curves in the last spell of distress.

Bad Times and Gold Prices

It’s not the first time that the global economy is crashing. Back in the great recession of 1930, the Great Depression hit the entire global economy. Comparing it to the 2008-9 one, GDP dropped by 15% and 1% respectively.

The 1930 version had massive effects spanning both rich and emerging nations. It’s effects hit on personal incomes, revenues from taxation, and both prices of goods and services and profits.

Statistics captured a more than 59% drop in international trading, while percentage unemployment hit 23% in the US. In some nations, it hit 33%.

How Do Gold Prices Behave During Big Recessions?

When everything is performing regularly,  the price determination reaches equilibrium through the powers of supply and demand. On that note, global requirements for physical gold relax as other metrics take on the yardstick role within the economy.

Federal reserves relied on that to stick to gold as the yardstick for economic performance as the economic conditions shifted from worse to the worst.

From 1929, Gold prices shifted from $20.67  to  $35 towards the end of 1934. At the onset, the stock market succumbed, as was signified by banks going out of business.

Huge uncertainties and opportunities lie ahead. But could gold re-do the 2008-09 curves due to COVID-19?

Time will tell.

 

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