The Effect of Coronavirus on Gold

The Effect of Coronavirus on Gold

Trading Opportunities

Gold prices reversed early losses on Thursday, driven by concerns over the spread of the coronavirus in Wuhan, China. As the virus grows in impact, gold hit a two-week high of $1564.6 USD/oz as investors sought a safe-haven asset, fearing that the virus could spread further and disrupt China’s economic growth.

As of Tuesday, the virus has reached at least 16 countries, and Wuhan, where the outbreak began, along with the larger Hubei province, has been effectively locked down, with mandatory public mask-wearing. This adds to the growing list of geopolitical and economic uncertainties, including Brexit and US-Iran tensions, which are pushing gold prices higher globally.

Gold, traditionally a stable and reliable asset during uncertain times, thrives in such conditions. It retains value much more reliably than many currencies over long periods. Our analyst, Phil, commented:

“With US stocks trending downward due to political events, traders are likely to turn to gold. This could help fill the wick on the monthly time frame at $1610.60 USD/oz.”

The ongoing situation in China is reminiscent of the SARS outbreak in 2002-2003, which also originated in China and spread to multiple countries. That epidemic resulted in 8,098 cases and 774 deaths. However, if history repeats itself, the economic impact of this coronavirus may be short-lived, especially if containment efforts are successful and the disease proves to be less deadly.

As of writing, more than 4,515 cases have been reported globally, with 106 deaths. However, these figures are based on Chinese government reports and have not been independently verified. It’s worth noting that during the SARS outbreak, China did not report cases to the World Health Organization (WHO) until 2003, and even attempted to hide some cases from global authorities.