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In the commodities market, the price of gold breaks new records: an ounce (31.1 g) of gold last week cost 2,051 thousand. AMERICAN DOLLAR. This is the highest price of gold in history. Compared to the March price, the price of gold has risen almost 39 percent.
The S&P 500, one of the major US indices, now stands at 3,351.28 points and is just 42 points below an all-time high. Since the biggest recession in March of this year, the index is up 49 percent.
Records are also broken by the Nasdaq Composite Index, a significant portion of which is made up of high-tech and related companies. On Wednesday, the index rose above 11,000 points for the first time. The index was developed primarily by Facebook and Apple, whose stocks are climbing rapidly these days.
Compared to the largest drop in this index during the quarantine, its value has increased by up to 62 percent.
The values of other US stock indices are also rising. The Dow Jones Industrial Average, which measures industrial stock prices, has risen 47 percent since March.
European stock indices do not show very stable growth, but compared to the biggest drop during the quarantine, the FTSE 100 stock index has risen 20%. This index is calculated by estimating the prices of the shares of the 100 largest companies listed on the London Stock Exchange.
One of the stock indices of the Baltic market OMX Vilnius GI, which reflects the situation of the Lithuanian stock market and its changes, has risen by 30% compared to the largest drop in March.
Will prices continue to rise?
Economists point out that due to the large amount of money entering the market, both gold and stocks are in high demand because it allows preserving the value of money.
“It is important to understand that such a flood of money is putting upward pressure on property prices. When there is unprecedented money printing, the problem arises: the funds in your hands naturally depreciate even in the absence of inflation.
This situation pushes prices up and the following stand out: to invest in stocks, it becomes difficult to find companies that can be described as cheap, and those who do not find where to invest their money, where to make a profit, choose another way: to convert money into gold, as a measure that is likely to hold its value in the short term, ”says Marius Dubnikov, a financial analyst and economist.
According to him, the price of gold has already reached unprecedented heights today, it has never been the case that an ounce would cost more than 2,000. The US dollar, and if the world continues to pursue the same policy it has done recently, printing a lot of money, we are likely to see even higher levels of gold and equity prices.
Tadas Povilauskas, an economist at SEB Bank, believes that people’s investment in gold was motivated by many reasons.
“There is a growing fear that inflation could rise in the world in the coming months or years as a lot of money is invested in the economy. Central banks themselves promise that for some time they will certainly tolerate a jump in inflation, if it does. there are.
On the other hand, interest rates are expected to remain low for some time. Thus, low interest rates, the threat of inflation, the uncertainty of where the world will continue, all this cocktail determines that, as with insurance, money has begun to move more aggressively in the gold market ”, says T. Povilauskas.
He says that whether the price of gold and stocks will continue to rise depends on how the epidemiological situation in the world changes, because, as T. Povilauskas himself says, this time the crisis was not caused by the financial sector but by the coronavirus pandemic , but it is expected that soon prices should not fall.
“Stock markets are assessing what will happen in the near future. Sentiment seems to be dominated by the notion that despite the steady decline in the number of infections, society is learning to live with it and no longer limit the economy.
Investors estimate that nothing bad will happen to the economy anymore, and central waves continue to stimulate the economy, which is at a record high. So there is money, you have to put it somewhere, the outlook is positive so far, so this time we shouldn’t talk about further adjustments ”, says the SEB Bank economist.
There is no bad time to invest
Gold and stock prices have risen, but Dubnikov points out that at times when money is being printed, it is better to invest the money somewhere and invest where it is understood.
“Let us understand that stocks, bonds require some skill or you need a consultant who can advise, you must be interested in yourself.
If a person understands that buying a property (ER) and renting it can provide a return, and that the property is also an object that retains value, in the long run it can be an investment, ”says financial analyst M. Dubnikov.
He emphasizes that you can invest in a variety of asset classes, and if you can invest a small amount, you can always invest in their development: language courses, skills development.
“You can invest in yourself to convert money that depreciates in the future into knowledge, which will then help you earn more income. So when it comes to investments, I think that knowledge and education are also investments that should be very relevant in this period ”, Dubnikov is convinced.
Also striking are the periodic investments -life insurance, pension funds- that can be used by those who save extremely small amounts, such as up to 100 euros.
“Interestingly, these days when money is printed, those with the most money are under greater pressure. It is difficult for them to make a decision, the amounts of money are important and the investment is not so simple because the prices are high and the risk is high.
At a time when you invest periodically, for example monthly, for small sums of money, this investment greatly dilutes your risk and even if you start investing during the peak, you will then buy cheaper assets, stocks, funds, and for therefore, will explode average price. Today such a person has a better chance of winning than one with large sums of money ”, explains M. Dubnikov.
However, while SEB Povilauskas, an economist at SEB Bank, agrees that investing is often a good option, you need to address contingency savings first:
“You don’t have to invest until you have savings and don’t feel comfortable for the near future. So it’s worth talking about investing only when you already have that 3-6 month buffer.
In that case, if you already have it and want to invest for a long-term goal, then I think investing in stocks, especially regular stocks, is a good option, but you need to do it wisely, on a regular basis, so you don’t lose all of your money at a time. You have to enter this zone slowly, regularly, well, and there is no bad time to invest. “
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