The value or price of gold has risen since mid-March 2020, reflecting worries across the financial world about how much purchasing power major paper currencies hold. In light of the deep recession caused by the coronavirus pandemic, the world’s most powerful central banks have responded in two ways: with a combination of quantitative easing – essentially money printing – and lowering interest rates (to sometimes even negative rates). The combination of these two monetary actions could possibly lead to inflation. As a result, many people seek gold as a more reliable store of value than normally stable paper currencies.
The Current Basis for Gold’s Value
The price of gold has been rising – as of July 2020 it reached a seven-year high – since major central banks responded to the severe recession caused by the coronavirus pandemic with a combination of quantitative easing and low interest rates. Both initiatives of major central banks aim to support devastated businesses and alleviate widespread unemployment by stimulating economic activity.