The world has been struggling with coronavirus for six months now. However, the damage it has caused to the global economy is just beginning to show. Experts say that the economy will face even more negative consequences of the outbreak in the third and the fourth quarter. The recession may last up to the first quarter of 2021.
The future is hazy. What we know for sure is that the world’s leading central banks were doing their best to “put out the fire” in the first quarter, trying to prevent a complete collapse of the global economy. Now that the situation has stabilized, countries are beginning to rebuild and jump-start their economies.
So, the economic downturn was not obvious at first, as it was disguised by a powerful rally in the stock market. However, after it became clear that there will be no more fiscal support from the Fed and the ECB, new problems have emerged. Now that corporate statistics start to come in, we received a confirmation of the negative trends.
- Just a couple of months ago investors hoped that the global economy would recover according to the V-shaped scenario. Now they understand that their hopes are not being justified. This is especially true in the United States, where novel coronavirus keeps spreading.
- So, the main crisis is still ahead. One of the reasons is the disrupted supply chain. Besides, the market is concerned that COVID-19 may accelerate de-globalization, which began a year ago during the US-China trade confrontation.
- So what should we expect in the third quarter? Most likely, zero economic growth or even negative growth, as well as an increase in debt, and ultimately the rise in the inflation rate.
So, where to invest now?
In gold, of course. In 2020, gold became the only profitable commodity. After it surged sharply in spring, gold has been showing steady growth since then. Last week the asset revisited its 2012 highs, the barrier it couldn’t reach for a long time. In Q3 gold will most likely gain its full-on upward momentum.
In Q3 and Q4, we inflation growth and a decline in the US dollar – these factors, in our opinion, will support the demand for this precious metal. It is worth taking into account growing political tensions in the United States amid the upcoming 2020 presidential election. Oh, and by the way, Washington and Beijing have been at loggerheads for a long time now.
Gold has already rallied through the 1800 threshold.
If what happens in the market in the coming months does not differ significantly from the forecasts of major regulators, we’ll have all chances to witness gold prices rise above $ 1,900 per ounce, and even test the 2000 area at the end of the year.
Should we buy gold now? Quite frankly, now is not the best time for such an investment. The precious metal is heavily overbought and may face correction in the near future . It is hard to say where it will go, but it is best to wait until the correction is over and enter the market to buy from lower levels.
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