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Ending coronavirus lockdown will not stop gold


28 April 2020

The gold price is down in today’s trading session as the number of coronavirus cases begins to fall worldwide which is leading to speculation that some countries will begin to reopen for business and has lessened the appeal for the safe haven metal.
Some states in the USA, as well as Australia among other countries, have eased restrictions on their populations, allowing larger gatherings of people while at the same time permitting more business to open which is giving hope that the world economy is on its way to some sort of normality.

“We’re seeing a positive trajectory in coronavirus cases in Europe and in the U.S. We are starting to see a lot more talk about economies reopening and trying to get business back to normal as much as possible and that does seem to be lifting sentiment,” said Craig Erlam, and analyst from OANDA. “This kind of bounce in risk appetite is potentially fueling profit taking in gold,” he added.

Some analysts however believe that the retreat in the gold price should be temporary as it will take a significant amount of time for the economy to get back to even half of the level it was pre coronavirus and this factor should keep the gold price well supported as the year unfolds.

“Even when the lockdown is lifted, the world will still be far from any kind of normality. In fact, the bigger risk then is economic collapse, as indicated by the disastrous economic indicators virtually everywhere,” said Carsten Fritsch from Commerzbank in a note. “To counter this, governments around the globe are likely to continue spending unparalleled sums of money — most of which will be created by the central banks,” he wrote.

A damming report from one of the world’s top disease control  specialist has painted a grim picture that even though the coronavirus may subside as the year unfolds, it is likely to come back with a vengeance next year and the economic pain will continue. If this theory gains traction it may lead to gold becoming a good long term investment

“There’s a possibility that the assault of the virus on our nation next winter will actually be even more difficult than the one we just went through,” said the director of the Centers for Disease Control and Prevention Robert Redfield “We’re going to have the flu epidemic and the coronavirus epidemic at the same time,” he added.

#source

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