It seems that gold price has upturned the downturn. Amid the devastating impacts of COVID-19 pandemic, gold price climbed to a high of USD1,900 per troy ounce. At this level, gold price surpassed the previous high last seen in 2011. Is this a bubble in the making or the start of a multi-year bull run for gold price?
Against the backdrop of soaring gold price, a member enquired what should be the investment strategies that one could undertake amid the downturn. Indeed, it is almost 6 months since the outbreak of the virus. In view of this, I do think that it is time opportune to take stock of the situation and the investment strategies to undertake.
On 2 February 2020, I wrote an article, “Wuhan virus offers three opportunities to build wealth”. In that article, I had doubts that gold price would hit USD1,900 per troy ounce. Instead, I predicted that the on-going uncertainties would lead to an increase of gold price by at least 10%. However, the current form of gold price had proven me wrong. Nevertheless, if investors had bought gold at USD1,580 per troy ounce back in February 2020, they would be sitting on handsome profits now.
Apart from gold price, I wrote that one could buy medical stocks like Top Glove, Medtecs and Riverstone Holdings. Another of my suggestion was to adopt a value buy strategy and bought SGX stocks which had been severely impacted by COVID-19, such as Genting Singapore and Wilmar. Both companies have potential catalysts – Genting Singapore is in the race for winning a casino license while Wilmar is listing one of its China units.
I also wrote that one might choose to short counters impacted by COVID-19. An example I cited was Singapore Airlines (SIA). Indeed, SIA share price had been roiled by the travel bans, fuel hedging losses and a massive rights issue. Those who had shorted SIA share price would have made much money.
With the exception of Genting Singapore, I think most of my February forecasts had been pretty good. Question now is: where should we go from here? Is it the right time to be greedy in the stock market or buy gold given that gold price is on the ascend again? In this article, I will share my insights and my investment strategies.
Gold price at threshold of new era
COVID-19 has unleashed an unprecedented damage to global economy. Six months have passed and we are still not seeing any light at end of tunnel. Many countries had reopened their economies, only to suffer second and third wave of infections. At this point of writing, USA has the highest of infections numbering 4.3 million and almost 150,000 deaths. To tackle the virus fallout, the US government implemented the quantitative easing approach last used in the Great Financial Crisis (GFC) of 2008, causing gold price to rise again.
With USD4 trillion of stimulus, the US government is releasing gigantic amount of hot money. At the same time, the US Federal Reserve has also slashed interest rates to near zero. This means that the saving rates is near to the abysmal levels last seen in GFC, leading to “cash is trash”. In fact, US dollar Index plunged to 22-month low of 94.60 on 24 July 2020. These factors caused gold price to sky-rocket once again.
Given the extremely low saving rates, hoarding cash may [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]National Day Special Offer!
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