Gold holds a special and unique place in the world financial system. The yellow metal is a commodity with industrial applications. It is also a currency. Central banks, monetary authorities, and governments hold the precious metal as an integral part of foreign currency reserves.
Long before there were dollars, euros, pounds, yen, yuan, or any other currencies circulating through the worldwide financial system, gold was money. Gold has a prominent place in the Bible’s old testament. Archeological evidence points to gold’s role in ancient economies.
Every ounce of gold that has come from the earth’s crust continues to exist in some form. Gold is eternal. In 2020, the price rose to a modern-day high of $2063 per ounce. At the turn of this century, gold traded below the $300 level. With gold sitting below the $1740 level at the end of last week, some market participants say that gold’s best days are in the past.
However, you should not count out this precious metal which has a long history as a store of value. Gold is resting, and it is likely to surprise over the coming months and years. The two-decade trend in the gold futures market is higher. The current environment continues to support higher lows and higher highs.
Gold mining shares tend to provide leverage to the price action in the gold market. They underperform the metal when its price falls and outperform during periods when the commodity appreciates.