COVID Gold Market Impact from Strained Economy

The coronavirus continues to sweep across national borders to infect humans and crush the economy. The impact of this global shutdown has affected the lives of millions of Americans as unemployment skyrocketed to 10 million. This economic shutdown has also affected the gold markets, but gold is seeing a comeback from the fluctuating stock market, oil price war, and unemployment. As the economy continues to struggle to get back on its feet, the gold market is expected to boost to $1800 over the course of a year.

Coronavirus Unemployment

Back in February, unemployment was at a half-century low around 200,000. Today, the US sees about 10 million Americans in unemployment. As businesses scale back on services and hours—if they have not already closed—the rate of unemployment will continue to spike upwards. The unemployment number already is beyond that of the 2008 Financial Crisis. It is also expected to keep growing to 25 million within the next few months. That is if the coronavirus is not under control soon. Because of the pandemic, unemployment spiked in a way that has never been seen before. The government keeps coming up with plans to tackle the economic crisis and help small businesses and the unemployed. However, as they try to mitigate the failing economy, it is entirely possible the economic deficit could rise to WWII levels.  As this crisis continues, the gold market has seen some fluctuation, but is now rising and is most likely to keep increasing.

COVID Gold Market

As traders and investors looked to sell stocks and hedge against the economic crisis, March became a month of fluctuation for all assets. The gold market dropped below $1500/oz earlier, but it has since picked up again.  The COVID Gold Market is experiencing gains right now as the US labor market withers. After unemployment rates rose, gold also boosted. In particular, June gold futures have broken past $1600/oz. This rise in weekly unemployment claims shows exactly that the US economy is suffering from the pandemic. As the economy plummets, investors are buying gold to hedge against the oncoming global recession. The future for gold is positive as a result of this turmoil. Analysts from the United Overseas Bank (UOB) predict gold to rebound in the future 2020 quarters. The UOB anticipates Q2 to see gold trading at $1650/oz. Q3, at $1700, and Q4 at $1750. Finally, the projected Q1 for 2021 is gold trading at $1800/oz. The last time gold traded this high was in 2011, and once in the 1980s. 

Gold Market Future

UOB’s Head of Market Strategy Heng Koon stated that gold will continue to see gains. This is from outside factors of global central banks flooring rates and entering Quantitative Easing Programs: “Going forward, once the USD funding crunch potentially dissipates across 2Q20, massive global monetary policy easing coupled with unprecedented fiscal policy stimulus will light the fuel for further gold strength.” (Heng Koon, Kitco) A global recession is coming, and this will impact businesses and individuals’ risks of defaulting. This reinforces gold’s status as a safe-haven asset. Additionally, as air transport and bullion trading centers and refineries temporarily close (or partially shut-down), the gold market is in short supply. This pushes gold futures to a notable premium against the gold spot price. Heng also says the net result of this is a wider bid-offer spread from the signs of limited liquidity. On top of that, it is expected that lower interest rates shall continue for an extended period. This is also good for the gold market. But, before gold can continue to climb to the eventual $1800/oz, the US Dollar funding crunch must end.

Stocks and the Oil Market

The stock market opened flat today, April 2nd, but quickly resurrected after Trump announced an agreement between Russia and Saudi Arabia to lessen pressure on the oil market.  As a result, the WTI Crude is up over 20%, returning to trading above $25 a barrel. This is in direct response to the price war calming, for the moment.  Overall, major stock averages have lost more than 20% year to date. This puts major stocks into the deep bear market territory. Unfortunately, this economic damage will not subside until after the coronavirus is under control. Even then, the damage will not be fully remedied for some time to come. Once the workforce can resume and unemployment abates, we may be able to see some recovery. Before that time though, the gold market will most likely keep soaring upward. 

Bullion Exchanges

Bullion Exchanges is your trusted precious metals retailer located in the heart of Midtown Manhattan’s Diamond District. Unfortunately, we temporarily closed our storefront until further notice of the impact of the coronavirus. Although we have a partial reopening for shipping, online orders may still take between 15-30 days for shipping and handling from international distributor delays. We are still working hard for our valued customers and are handling products with the highest care. If you have any questions, please contact us. We will be happy to help you, but we ask that you remain patient. We are working with a high volume of orders and customers at this time. Follow us on Twitter for updates! Disclaimer. This article is not meant to serve as professional economic advice. Any action you take based on the information from this article and website is strictly at your own risk.

Other articles: 2021 Philharmonic Coins Strike a Chord with Collectors, New Series Celebrates Venerated "Queen’s Virtues", Introducing Alpha Bullion, Physical Gold on the Blockchain, Queen's Beasts 2016 - 2021 Complete Collection. Collectible Silver Envela COVID and 2020 Bullion