The only thing less clear than how to live in the shadow of a global pandemic is trying to guess where world markets will move in reaction to the latest news about it.
Looking back over 2020, it is difficult for anyone to have predicted what was going to happen – and looking forward, it is set to be harder still.
However, there are a couple of mainstays that bring comfort to investors in uncertain times as they are either of vital importance or none at all… at least not yet.
The rises and falls of gold, oil and bitcoin have been in the news alongside the pandemic, as each have fluctuated at different times amid the crisis. As we go into a New Year, which is bound to offer a whole range of new challenges, we look at what 2021 may have in store for these assets.
In a crisis, investors love gold. Over the centuries the brilliant metal has become a treasure and is now seen as a holder of value. However, as investors cannot do much with it, nor is it easy to store, companies operating within financial markets have found ways to make buying it and holding it as easy as a mouse click.
Gold reached an all-time high of more than $2,000 an ounce in August 2020, thanks to many investors fleeing more risky assets amid the pandemic. It fell back as we thought things were settling down, but is still closing off the year around 20% higher than it started.
As 2021 dawns, bringing both vaccines and new mutations of Covid-19 with it, gold may be on the buy lists for investors uncertain of which way to go.
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Bitcoin is a bit like gold. It doesn’t really have a common, daily use (yet) and investors seem to move in and out of it based on sentiment rather than practicality. It is a currency that, like gold, is not tied to the actions of a government or country, and doesn’t really care what is going on around it.
This resemblance is one of the reasons bitcoin saw a massive surge in popularity amid the challenges of 2020. After testing its all-time-high levels throughout the year, it smashed through the $20,000-a-token range in mid-December – and kept going.
There is one major difference to gold, however, that may see its value go higher. Unlike the world’s favourite metal, you can keep bitcoins in your own vault without needing to pay a small fortune for security guards — and you can use it to buy things. It is not just an investment; it has practical value.
While we are still a little while away from supermarkets accepting bitcoin over fiat currency, it is becoming increasingly likely that we will start using the cryptocurrency to buy and trade things, which may only increase its appeal.
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If you want to take a look at the future of the economy, look no further than this statistic: At the start of Christmas week, one bitcoin would buy you around 500 barrels of Brent crude oil.
Not that most of us would have any use for or ability to store it – which was the major issue at the start of the pandemic when it plunged to less than $25 a barrel – but it is wild that a commodity still largely powering the planet costs so much less than something with no widespread real-life use.
Although this comparison pits apples against rubber ducks, the question for oil investors must now be around the sustainability of its future. The pandemic has hit oil hard, but is not just the drop in travel and its use in manufacturing that has hurt this once beloved “black gold”.
Since July 2016, oil has not traded above $100 a barrel, and has not come close to $75 since October.
Why? The future.
National governments, worldwide institutions and even consumers are demanding change in how we power our economy and society. This has been primarily manifested in targeting a colossal cut in fossil fuel usage.
Along with coal, oil is seen as the worst offender, meaning the need for it looks set to plunge.
Already, several global energy giants have pledged to write off fossil fuel assets and leave them in the ground, appointing sophisticated teams of scientists to find new sustainable and renewable energy sources, so they don’t lose too much market share.
While there is still life in the oil market – at least until they start producing electric cars en masse – it may pay to get in and out sooner rather than later.
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