(Last Updated On: October 1, 2020)
Pandemic and Gold
What is the link between a pandemic and gold? Well, gold may be a safe haven asset during a pandemic, as disease outbreak disrupts the economic activity and increases the uncertainty, leading sometimes to a stock market correction. However, a lot depends on the given pandemic. If it is a pandemic that does not reach the US, then any impact on the gold market should be limited and short-lived. Safely buy genuine gold .
The COVID-19 pandemic was again the main influence on the gold market in the second quarter, severely curtailing consumer demand while providing support for investment,” according to the World Gold Council’s Gold Demand Trend report for the second quarter. “The global response to the pandemic by central banks and governments, in the form of rate cuts and massive liquidity injections, fuelled record flows of 734 tons into gold-backed exchange-traded funds (ETFs). These flows helped lift the gold price, which gained 17% in U.S. dollar terms over the first half, hitting record highs in many other currencies.
The best example might be the severe acute respiratory syndrome (SARS) which was caused by the SARS coronavirus traced to the bats. The pandemic started in Guangdong Province, China, in November 2002 and ended only seven months later in June 2003, peaking epidemiologically in March 2003. According to W.H.O, the incidence was 8096 cases with 774 deaths, resulting in a case-fatality rate of 9.6 percent
However, the peak of the outbreak was between February and May 2003 – and in this period, the price of the yellow metal declined. In other words, gold peaked in February 2003, and then declined until April despite the pandemic being still in full force
The rapid spread of the coronavirus, radically accommodative response of the Fed (including slashing interest to almost zero), the implementation of economic lockdowns, and deep economic crisis pushed gold bullion prices quickly to above $1,700. Actually, gold performed much better than many other assets, confirming its role as safe haven.
What is important, is that the containment of the pandemic(or at least of its first wave) and the end of the economic lockdowns in the Western countries did not push the gold prices lower neither did it work for diamonds
. Actually, the legacy of the coronavirus crisis will be subdued by GDP growth perhaps bullion dealers will turn to more gold bars sales , ultra dovish central banks, very expansionary monetary and fiscal , and negative real interest rate These factors are likely to support the gold prices, although there will be both ups and down on the way
Perhaps when the covid is contained bullion dealers
will turn to more gold bars sales ,gold coins sales to liquidating it to get cash for the gold bullion so as to use it for circulation as economy will be active.
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