What can you invest your money in during the crisis to make a profit? Is gold a variant?

Gold loves crises, says an old saying. And with 13% price increases this year, to the highest levels in 2012 and expected additional increases, as investors seek safe havens for their money, the saying is confirmed in the case of the coronary crisis.

But as people and countries see a decline in their incomes, traditional gold consumers in India and China buy less, and central banks have reduced their purchases. Without them, rising gold can be difficult to sustain.

For now, gold costs around $ 1,700 an ounce.

Some predict that gold prices will rise in a period similar to 2011, when the metal reached $ 2,000 an ounce. Bank of America Merrill Lynch even estimated that gold could hit $ 3,000 by the end of next year.

But if history is a benchmark, it takes a constant period of increasing demand to truly boost gold at a higher price, and given the depth of the economic downturn specialists are expecting due to the coronavirus, individual consumers could buy less gold in the future.

“You find yourself very knowledgeable about gold, whether it’s supporting inflation or an unfavorable environment,” says Andrew Sheets, chief strategist at Morgan Stanley. But gold is not that simple. “Looking at the 2003-2012 period, gold has risen in virtually every scenario possible. Boom, dip, crisis, no crisis. Then it declined every few years.”

In the past half century, gold has had two spectacular periods.

The first was triggered when governments abandoned control of gold prices and lowered bans on private property around 1970, decisions that brought gold from $ 35 an ounce to about $ 800 an ounce in 1980.

Two decades of weakness followed, during which central banks sold thousands of tons of gold. Until 1999, an ounce cost $ 250.

Then the market structure changed. European central banks have agreed to coordinate sales, stabilizing prices. China has allowed more people to own gold, and purchases have increased. Financial instruments like the ETF (Exchange Traded Fund), which stores gold on behalf of investors, have also provided an easier way for people to buy metal.

Between 2003 and 2011, annual demand for gold increased from about 2,600 tons to more than 4,700 tons, according to the World Gold Council.

The period ended when high prices affected demand. Prices stagnated until last year, when central banks began lowering interest rates, lowering bond yields and making gold more attractive.

The 2008 financial crisis marked the last golden effervescence. At the beginning of that crisis, gold prices fell sharply as the decline in assets forced investors to raise money by selling as much as they could sell.

The same thing happened now, when the global spread of the coronavirus caused panic in the market.

Also in 2008 and 2020, investors turned to gold in response to the massive stimulus from central banks, which lowered bond yields and increased the risk of inflation.

Some investors say that the acquisition of assets by central banks is equivalent to printing money and diluting the value of the dollar, paving the way for gold. Unlike money, “the Fed cannot print gold,” Bank of America said.

In 2008 and after 2008, demand increased not only for investors, but also for central banks and emerging economies like China, whose consumption increased from just over 200 tons in 2003 to 1,450 tons. in 2011

Now central banks, like Russia, are slowing down their purchases as they struggle to consolidate their savings.

Growth in traditional markets like China and India has collapsed in the face of coronavirus-induced social blockages.

The crisis is throwing millions of people into unemployment, and a consolidation of the dollar means that gold prices are already at record levels. “Disposable income is falling and gold prices are rising,” said Surendra Mehta, secretary of the Indian Jewelers Association, who predicted that people would buy less or nothing.

But I can sell. In Thailand this month, people queued to sell gold for the much-needed money.

India’s gold consumption could drop to 350 tons in 2020, from around 700 tons last year, according to All India Gem and Jewelery Council President N. Anantha Padmanaban.

Meanwhile, Chinese demand could hit 640 tons, down from 950 tons in 2019, said Samson Li of consulting firm Refinitiv GFMS.

Most analysts still doubt that gold prices will fall. Even Bank of America, which depends on $ 3,000 per ounce, estimates that the average price in 2021 will be $ 2063 per ounce, and that it will drop below $ 2,000 in the coming years.