The price of gold rose steadily on Monday, up approximately 3% from £1,324 to a peak of £1,367 an ounce, as the Pound weakened against major currencies like the Euro in the face of bleak economic forecasts from the likes of Deutsche Bank, who expect the UK economy to shrink by 6.5% this year as a consequence of the Covid-19 virus disruption.
Gold's value naturally rose on Monday due to futures demand, with June gold up $48.20 per ounce on the COMEX; a 2.9% rise to reach $1,693.90 per ounce - their highest since December 2012. Many investors appear to be turning to the futures market due to supply issues in the short-term, with many mines and refineries offline at present.
South Africa started a three-week national lockdown on March 23rd, when all its mining operations were suspended. Even nations such as Azerbaijan, which have continued mining, are suffering from major logistical problems. With virtually all air travel suspended, mining companies are desperately seeking alternative distribution methods.
Further down the production line and refineries are also being hit by the pandemic. Swiss precious metals refinery PAMP were shut down due to health restrictions. However, it announced on Friday it will restart operations. Nonetheless, this will still be at less than 50% capacity. Other refiners in the Ticino region, as well as elsewhere across Europe, are still hesistant to reopen at this moment in time.
Silver also rose from around £11 to £12 an ounce yesterday – a 9% increase – but today both metals have fallen back slightly. Reports of slow growth in the number of virus cases in Italy and Spain gave a huge boost to the stock markets, and the Dow Jones Industrial Average (DJIA) rose by nearly 800 points with American investors reportedly believing the peak of cases was almost upon the US – a bold statement in light of no slowdown in the official infected rate at present, let alone any unofficial estimate based on the majority of people not tested.
“This is going to be the hardest and saddest week of most Americans’ lives, quite frankly.”
“This is going to be our Pearl Harbor moment, our 9/11 moment, only it’s not going to be localized.”
US Surgeon General Jerome Adams to Fox News, Sunday April 5th
Regardless of whether investor sentiment towards the markets is right or wrong, demand for most precious metals has dramatically risen in the past 5-6 weeks in light of the coronavirus impact on the global economy, with the fear that bailouts will dilute and devalue currencies, leading to inflation.
Michael Matousek, head trader at U.S. Global Investors, told the Reuters news agency: “Technically, even when everything sold off in the market, gold sold off the least. That tells you gold is strong, people want to own it. So theoretically, gold should be the leading asset for the next six to eight months.”
