A CLOSER LOOK: investing in gold during the COVID crisis could be profitable

A Closer Look

Does it make sense to invest in gold during a pandemic?

FILE – In this Tuesday, July 22, 2014, file photo, gold bars are stacked in a vault at the United States Mint, in West Point, N.Y. (AP Photo/Mike Groll, File)

ARKANSAS (KNWA/KFTA) β€” Gold prices took a dip in dealing early Wednesday, May 6, due to a weak ADP employment report for April that showed mega U.S. job losses. But, overall gold prices are still up.

ADP Research Institute website (adpemploymentreport.com)

The ADP National Employment Report came in β€” down β€” at 20.236 million amid the COVID-19 pandemic. The report is a precursor to Thursday’s, May 7, Department of Labor employment report.

SO WHAT IS THE GOLD PRICE DROP AND EMPLOYMENT CONNECTION?

The worse unemployment gets, the higher gold prices would tend to rise. “That would not hold true on a day-by-day basis, but we’re seeing gold outperform significantly amid the COVID-19 crisis and resulting unemployment numbers,” said JM Bullion CEO Michael Wittmeyer, an online retailer of precious metals products.

Many people will invest in gold the way they might put money into a savings account β€” it could be viewed as protection against inflation similar to a savings account.

Wittmeyer said many gold investors aren’t necessarily buying gold in hopes of massive percentage gains over time, but more so to protect their wealth and offset losses in other investments during tumultuous times.

Investing in gold isn’t just for the wealthy. Investments can be a small as 1/10th of a gram, which currently trades at $15.

Depending on the investor it would not be prudent to put all of your money into gold, but a small portion of your net worth β€”5-10% β€” put into precious metals is a good balance.

“People who purchased gold prior to the COVID-19 crisis have experienced nice gains to offset the losses on their stock positions,” said Wittmeyer.

Gold is up 10% year-to-date, largely due to the pandemic and resulting fallout. One of the biggest recent drivers for gold prices has been government spending and central bank activity.

“Gold tends to perform well in an inflationary environment as there is only so much gold to go around, so if there are more dollars in circulation, gold will tend to increase in price,” said Wittmeyer. “We’ve seen the world’s central banks and governments create and spend trillions of dollars in the last couple months, which bodes well for gold prices going forward.”

4 COMMONLY CONSIDERED “PRECIOUS METALS β€” GOLD, SILVER, PLATINUM, PALLADIUM

These are deemed precious because they are rare, difficult to extract from the earth, and hold high economic value. Palladium is currently around ~$1,850/ozt, versus gold at around $1,700/ozt. People tend to stick to gold and silver as they are the most well-known and commonly traded metals.

“SPOT PRICE” v “ASK PRICE” v “BID PRICE”

Spot price is the current market price for a raw troy ounce of gold, which represents the cost to turn a raw ounce of gold into a fabricated product like a coin or bar. The Bid price is the price at which a company will buy an item from you. The Ask price is the price at which a company will sell an item to you. 

JM Bullion CEO Michael Wittmeyer

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