Gold prices are steadily increasing as the cost of China’s coronavirus outbreak escalates. The gold gains came as a huge leap in the number of reported cases emerged on Thursday – while there were just 2000 cases reported on Wednesday, Thursday saw 14,800 new patients confirmed as infected with the virus. In addition, another 240 deaths were reported, adding to the 1300 confirmed deaths already reported.
As a gold investor, this situation warrants careful supervision as it’s causing a more risk averse sentiment to prevail, leading markets to dip – and strengthening gold.
The spread of the virus has had a marked effect on China’s economy with car sales down 20%, many factories closed and businesses shuttered. From a wider perspective, this also has a significant impact on businesses around the world, as the closure of factories has provoked supply chain shortages – it is expected that steel will soon become scarce for example and firms such as Apple which rely on Chinese manufacturing for some items are facing shortfalls. The car industry globally is also suffering and many retailers have been forced to close their doors in China, causing a knock-on effect for profits.
The World Health Organisation may also have tipped markets back into risk aversion after warning against fake news which has suggested the virus is slowing. It said that ‘extreme caution’ should be used when considering those stories and has classified the virus as the greatest global threat, worse even than terrorism.
In this environment, gold again comes into its own as a safe haven asset – becoming more so as risk aversion deepens and economic losses from the China shut down pile up. Buy now to put yourself in the optimal position for further price increases – yesterday (Thursday) saw gains on the back of the patient number rise so more could well be to come in the very near future.
