People in the gold industry said that the inevitable printing of new currencies in the United States will lead to an increase in the circulation of legal tender. In turn, this increase will further dilute the value of the U.S. dollar, thereby weakening its status as the world’s most important reserve currency. Gold industry participants also added that the depreciation of the U.S. dollar may boost precious metal prices in the medium to long term.

Gold new money

On the eve of the U.S. election, the price of gold fell slightly, and people generally believed that it was a substitute and a better store of value. In August, a few months after the US government issued stimulus policies to ease US citizens and businesses, the spot price of gold hit a new all-time high of US$2,058.

But as Stephen Innes, a strategist at financial services company Axi, explained in a report, people expect the Biden administration to approve a “substantial Covid-19 stimulus plan”. According to him, this will “devalue the U.S. dollar and increase the value of gold accordingly.”

Despite concerns about locking in 2.0, gold prices are expected to rise

Similarly, Guido van Stijn, managing director of Aurus Technologies, told that regardless of the winner of the US presidency, a new round of stimulus measures is coming. Stijn said:

Both [Biden and Trump] They have expressed their support for various quantitative easing measures, (and therefore) we can expect bullish growth in gold prices in the medium to long term, regardless of who is elected.

However, due to the surge in some new cases of Covid-19 infection, the expected large amount of new funds may not achieve the desired effect. As people increasingly worried that the second wave of infections would cause more deaths, countries such as the United Kingdom and France have since announced new lockdown measures.

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Potential wrenches in Covid-19 works

If more countries, including the United States, embark on the blockade route, this will not be good news for gold prices, because Inness explained:

Gold traders worry that these lockdowns may lead to deflationary pressure… The next gold transaction is indeed a deflationary transaction.

The previous blockade has led to a decline in demand for certain goods and services, resulting in a decline in their prices, because falling prices or deflation reduce the attractiveness of gold and because the store of value also declines.

Nevertheless, it remains to be seen whether more countries will re-implement lock-in restrictions. Meanwhile, at the time of writing, the spot price of gold is $1,895.72.

Do you agree that more quantitative easing policies will boost gold prices? Share your thoughts in the comments section below.

Tags in this story

All-time high price, backup value store, Aurus Technologies, coronavirus lock-in, COVID-19, deflation, gold performance, gold price, Guido van Stijn, Stephen Innes, stimulus check, US government, world reserve currency

Picture Credits: Shutterstock, Pixabay, Wiki Commons, Tradingview spot gold chart,

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