Which coin is going to explode now?
Will COVID-19 cause the gold price to explode?
Connections and prognoses!
The gold price and the coronavirus have one thing in common in the last few weeks: the curve goes steeply NORTH! There is currently no stopping both the spread of the virus and the development of the gold price.
But there are serious differences in one point: While states are trying to curb the rapid spread of the corona virus, Italy has already closed its borders and the whole country is already under quarantine, even the big banks are now behind the rising gold rate. Instead of stepping on the brakes and countering this with short sales of paper gold, as usual, everyone is betting on further rising prices and thus heating up the price fireworks all the more. If you look deeper and look at the enormous explosive power of the current crisis, gold is still drastically undervalued.
From expert Mag. Walter Hell-Höflinger
The coronavirus as a trigger for falling share prices
The coronavirus is spreading exponentially and we are only at the beginning of the development. In order to slow down the spread, measures are being taken that we in Europe would have considered absolutely impossible just a few weeks ago. Not only individuals are quarantined, but entire countries (see Italy) are sealed off. People are curtailed in their personal freedoms, as we otherwise only know from dictatorships.
On the one hand our health system threatens to collapse, on the other hand the economy is coming under massive pressure from the extreme measures. Sectors such as tourism have been completely crushed, production chains are interrupted, organizers and cultural companies have to temporarily cancel everything and are left with high losses. We are at the beginning of a crisis, the extent of which we cannot yet assess or grasp.
The coronavirus, or rather the reactions of politicians and the protective measures for our health system, are causing massive damage to the economy. If the economy were healthy, it could probably cope with the artificial deep sleep of a few weeks without long-term damage. However, the system was in such a fragile imbalance before Corona that the virus is now brutally crushing it.
On 9 March the Dow Jones Index plunged over 7% immediately after opening. Shortly thereafter, trading was suspended for several hours. Even trading in government bonds was suspended. The last time this measure was used was 10 years ago. With the slump in share prices, government bond yields also plummeted.
The central banks react with panic and are even planning another rate cut in mid-March after the rate cut last week, in the hope of providing companies with more cheap money and absorbing the falling prices. Here most of the powder has already been used and it is questionable how much positive effect this measure will have now. The opposite is more likely: the FED's panic reaction continues to unsettle investors and everyone is heading for the exit.
Facts about the coronavirus
Compiled by the researcher and bioinformatician Dr. Sebastian Maurer Straw. He researches the latest virus mutations from flu to Ebola.
- COVID-19 is terrifying because of its rapid spread.
- The panic is exaggerated - but hygiene is appropriate.
- The death rate of 6% is not true - since the many cases with a mild course of the disease are not recognized as corona. It is just as deadly as the normal flu with 0.1%.
- Older people and people with weakened immune systems are at the greatest risk.
- Children are often carriers and show little or no symptoms.
- The chain of infection will soon be interrupted by the measures, but will flare up again later.
- most infections have only mild symptoms!
How is the crisis affecting the gold price?
We have a toxic mixture of: no or negative interest rates, falling stock exchange prices, high debt, no returns from seemingly safe forms of investment such as government bonds and a general panic and uncertainty. Historically, investors always fall back on commodities in such situations, i.e. oil and gold.
But there is a problem with the oil. On March 9, the Monday that was so devastating for stock prices, the price of crude oil also fell by 34%. This is the sharpest drop in prices within a day in the history of the crude oil market. The oil price has halved since the beginning of the year. If you calculate the price of crude oil in grams of gold, we are currently at an all-time low. Crude oil has never been cheaper than it is now!
This slump has of course political reasons, but it is not about an agreement, but rather about a lack of agreement. Since the outbreak of the coronavirus and the reduced demand for oil in China, the price of crude oil has been under pressure since the beginning of the year. The OPEC states wanted to support the oil price through a coordinated cut in production. The talks between these states failed at the weekend and Saudi Arabia, on the contrary, even wants to increase its production and thus further reduce the price of oil. Nobody benefits from a crude oil price of 30 US dollars a barrel! In the USA, this just covers the production costs, which are much higher here than in Saudi Arabia. That only shows how badly the global economy is in a bad position.
Oil is currently off the table as an investment. It remains: gold.
Why does the gold price rise in times of crisis?
Gold is the ultimate form of investment for times of crisis. Gold maintains its value even in crises, wars and times of inflation. If the volatility and uncertainty in the stock markets increase, investors flee to the safe haven of gold.
There are also psychological reasons for this. Gold is tangible. It's constant. In contrast to highly complex financial products, you can understand gold and trust its value.
If we look back over the last few decades, the gold price has benefited from every major uncertainty or crisis.
Global interrelationships and growing uncertainty
In my opinion, the hysteria and panic associated with this virus are far exaggerated, according to experts and specialist opinions. The main cause of such massive outbreaks in Italy was one thing: greed.
In the clothing industry in Northern Italy in particular, thousands of cheap Chinese workers were employed as cost-saving measures in order to keep the label “Made in Italy” - and at the same time to be able to benefit from the low wage costs. In addition to the savings, this army of seamstresses and tailors also brought a viral present from their homeland. The late reaction of the Italian authorities and the underestimation contributed to the epidemic spread of the virus.
In addition to the almost forgotten flood of refugees that is rolling towards us from Turkey, a virus that paralyzes supply chains and entire areas of the economy such as tourism and transport is also hit by an already ailing economy. An economy that has been looking for global savings potential under increasing cost pressure and tax burdens.
This mix of sociopolitical, sociopolitical, security, economic and health factors has a highly explosive potential when combined. As if our political leadership weren't overwhelmed by one of the topics anyway, there are now several - and all of them at once. There are questions about questions:
- How do you stop an epidemic without causing panic?
- How did you prepare medically?
- How do you maintain security in the cities? With which staff?
- How do you avoid supply bottlenecks?
- How to avoid panic selling and price falls on the stock exchanges
But one thing will be certain - the uncertainty. And gold always wins when there is uncertainty.
Do you want to buy or sell gold?Come now for a personal, non-binding and serious consultation in one of our branches in Vienna 9 or Vienna 22.
Gold price forecast for 2020: are we facing a price explosion?
In euros, the price of gold chases from one all-time high to the next. But the exchange rate has also risen sharply in dollars recently. This results on the one hand from the strong demand for gold, on the other hand from the weakening US dollar, which has lost massively in value against other currencies such as the euro in recent weeks.
If we consider the extent of the crisis, gold is still drastically undervalued. The stock market crash will also have consequences for the real economy. Unemployment will rise, purchasing power will decline, companies will go bankrupt, loans will no longer be serviced - and the crisis will spill over to the banks. We are at the beginning of a crisis with enormous destructive potential. From the current level on the stock exchanges, it can still go down by a good 50 or 60%. The key interest rate will soon be at zero or in the red in the USA as well. There is no end in sight to the oil crisis.
What does this mean for the gold price? There is only one direction here, and that is up. Experts see the price at 5,000 euros by the end of the year.
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