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The Effect of Coronavirus on Gold

The Effect of Coronavirus on Gold

Gold prices reversed early losses on Thursday, impacted by the growth of the coronavirus in Wuhan, China. Gold prices hit a two-week high of $1564.6 USD/oz, as investors seek a safe-haven asset, fearing that the disease may spread further and impact the growth of the Chinese economy.

As of Tuesday, the virus has spread across China and has been confirmed in at least 16 countries. Wuhan, the origin of the virus, as well as the greater Hubei province, have effectively been locked down, with such measures being taken such as masks in public being mandatory.

This only adds to the growing list of economic and geopolitical uncertainties already affecting the new year, such as Brexit and tensions between the U.S. and Iran, which is only driving gold prices higher in the global markets.

Gold is traditionally an asset which thrives during times of economic uncertainty, as it is an asset which is historically stable, and able to retain its value over a long period, compared to currencies.

Our analyst Phil had this to say about the new trend in gold:

“With the US stocks pushing to the downside due to political events we can see traders falling back on gold. This could help us fill in the wick on the monthly time frame at $1610.60 USD/oz.”

For more check out Phil's Trade in 60 seconds here:

This current situation in China is reminiscent of the 2002-2003 SARS outbreak, which also originated in China and eventually spread to several other countries, leading to 8,098 cases and 774 deaths. However, if that epidemic is any indication, the impact of coronavirus may be short-lived and only have a modest impact on the global economy, especially if this case is more contained and less deadly.

At the time of writing, there have been more than 4515 reported cases of coronavirus across the world, with 106 reported deaths. However, this figure was reported by the Chinese government and has not been confirmed with any other organisation. China did not report the SARS outbreak to the World Health Organisation until 2003, and even went as far as to hide patients from WHO authorities.