Time and again it is the intrinsic value of gold, also known as intrinsic value, that leaves investors in no doubt as to which type of provision is the only right one in times of crisis. The globally rampant corona virus has affected the entire global economy. National lockdowns, stock market crashes, slumps in profits and gigantic job losses led to a fragile state of the economy. The price of gold is an exception to this. Since the beginning of the year, the price of gold has risen to well over USD 1,700, an increase of around 13 percent.
In this precarious situation, many investors waited for a timely recovery of the economy in the corona pandemic despite the shutdown that lasted weeks at the beginning. However, this was not to happen. Instead, the world’s best-known stock market index, the Dow Jones Index, plunged by 6.9 percent. It is followed by the S&P, the Hangseng and the Kospi indices (leading stock indices in Hong Kong and South Korea).
The International Monetary Fund (IBF) expects the global economy to shrink by 3 percent this year. The World Bank even forecasts a loss of up to 5.2 percent. Gold is once again proving to be the big beneficiary of the crisis. There are several reasons for this.
Economics is psychology or the coming together of bad news
The catastrophic effects of the Corona Pandemic have prompted many states and central banks to put up trillion-dollar rescue umbrellas. With the result of a further
aggravation of the debt situation worldwide and the psychological effect that there is no blueprint, no script for this crisis. So there is no certainty of a good exit from the crisis, and certainly not an early exit.
All in all, the recent increase in the number of infections and the simultaneous fear of a second wave of infections, the high unemployment rate, possible negative interest rates and the prognosis of a devastating economic slump all play perfectly into the cards of the crisis metal gold. An ideal environment for gold to stabilise its 7-year high.
For gold of a negative rate of interest is no ghost
The SARS-CoV-2 virus has attacked all economies of the world without preparation. Should the corona pandemic last longer and cause further damage, US Federal Reserve Chairman Jerome Powell does not rule out the spectre of negative interest rates. The only thing that can be heard from his statement on the economic situation in Corona times is that he too does not know anything specific.
This is one more uncertainty that is unbearable for investors, in times when life is full of new question marks. This high level of uncertainty and risk will increasingly encourage investors in the future to abandon shaky asset classes and invest their savings in physical gold that will retain its value. Although gold does not yield interest or dividends, it remains stable in value and can act as a currency (money) at any time.
Kilian West from gold trader valvero is confident: “We are clearly feeling the current market situation, but despite the tense situation we are seeing increased demand for precious metals. The crisis resistance of the gold price is the decisive criterion for many customers”.
Growing debts, falling interest rates and the uncertainty as to what will happen medically but also economically in the Corona crisis give the yellow precious metal good prospects in the short and medium term.
Born 1981 in Strasbourg, is a freelance journalist for various online media throughout Europe, focusing on finance, real estate and politics. He gathered his professional expertise as a consultant for global players and medium-sized companies. Fournier studied economics and german in Paris and Dresden. He currently lives in Saarland and has been a member of the Euro Leaders team since the beginning of 2019.