From the March/April '20 issue of the Gold Prospectors Magazine
By Alexandra Porto
You might not think wild animals, a virus, China, and gold would have anything to do with one another, but they do. Of course, we’re talking about the new coronavirus that originated in Wuhan, China, this past December. Now going onto March and the rest of the year, the impact is proving to extend far beyond just the price of gold..
First, they blamed snakes, then bats, and now anteaters.
This respiratory virus is suspected to have been transmitted by a wild animal to humans at a local wet market. Scientists most recently believe that the coronavirus was caused by a scaly anteater known as a pangolin, but the jury is still out until more conclusive research reports are available.
According to Bloomberg.com, this coronavirus exhibits less severe symptoms than SARS but has been spreading at a much more rapid pace. In only two months, it surpassed the death toll from the 2002-2003 SARS outbreak.
What does this have to do with gold, you may ask?
Fear is a contributing factor that is moving the markets.
Just as the markets were impacted by declared public health emergencies of SARS or Ebola in the past, they are also being impacted by this latest international outbreak. It starts with fear, which, quite frankly, can spread as quickly as the virus itself.
As Nasdaq points out, “when it comes to markets…perception is reality,” and this fear narrative could become a self-fulfilling prophecy.
There are still several unanswered questions to this latest outbreak and no specific treatment has been developed yet. This has led to a rise in Google search engine inquiries related to coronavirus, particularly its symptoms. All of which indicate a rising level of public fear.
In response, U.S. Federal Reserve chairman Jerome Powell has raised concerns about the virus’s impact on the stock market. While strong unemployment numbers have helped the U.S. market rebound temporarily, the stock market has slumped recently.
Gold ETFs Recently Reached a 7-Year High.
As stocks fall and fears rise, investors gained a renewed interest in bouillon as a safe-haven asset to hedge against any temporary losses in the stock market. According to Bloomberg.com, “the traditional haven has also been in favor as the Federal Reserve has signaled interest rates are likely to remain low for some time…”
This means now could be an opportune time to invest in gold, not only because of the fears surrounding coronavirus but also because of lower interest rates. Recently, gold electronically traded funds rose to a seven-year high while spot gold and U.S. gold futures also rose slightly.
“Even if the coronavirus situation improves, there are good reasons to expect continued inflows into gold,” Nicholas Frappell, global general manager at Sydney-based ABC Bullion told Bloomberg.com.
Is Cryptocurrency also Being Looked at as a Safe Haven Asset?
Other investors might even be looking to digital cryptocurrency, such as Bitcoin, during this time as a safe-haven asset. Bitcoin saw large gains recently as it topped $10,000.
Nigel Green, chief executive of the financial advisory deVere Group, told Forbes.com, “the ongoing upward trajectory of the price of bitcoin correlates to the spread of the coronavirus.” Sadly, right now the virus is spreading far too quickly, which means Bitcoin will too, if Green is correct.
In Bloomberg newswire, Jehan Chu, managing partner with blockchain investment and advisory firm Kenetic Capital, echoed his sentiment and believes that Bitcoin will explode in value as the global markets deteriorate.
The Virus is Impacting Global Markets.
According to the Telegraph, nearly 400 million people are under some form of quarantine. This has crippled industrial hubs in Chinese cities like Guangzhou and Shanghai, which has slowed the Chinese economy.
It has also affected automakers from the U.S., Europe, Japan, and South Korea who had to close manufacturing hubs based in China or were forced to suspend work due to a lack of parts. Tesla had to delay its Shanghai production of Model 3 cars as a result.
Food and beverage chains like Starbucks, McDonald’s, KFC, and Pizza Hut are suffering due to closures in China, as are luxury retailers who have also taken a hit from the shutdowns caused by the coronavirus.
Although gold prices have gone up due to safe-haven investments, gold jewelry sales are significantly down throughout Asia. “Nobody wants to go out, especially in China. Gold is a luxury item, nobody wants to spend money on that, they want to buy masks and alcohol,” Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong told Reuters.
Gold Price Per Ounce: $1,686.40
As of February 24, 2020 - www.goldprice.org
The content in this article is not to be taken as financial advice or guidance. It is meant for entertainment and informational purposes only.