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Gold prices hit seven-year high amid coronavirus fears

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19/02/2020
The price of gold has leapt to a near seven-year high as investors turn to the relative safe-haven asset as fears over coronavirus take hold.

The precious metal has climbed to $1,600 per ounce, a level last seen in 2013.

And according to The Pure Gold Company, the price has increased 11.5% since the first case of coronavirus was diagnosed, and continues to climb.

The firm said that since December, demand for physical gold bars and coins has increased by 313% compared to its monthly average and over a third of buyers have bought the precious metal for the first time citing a lack of safe alternatives for their money.

Josh Saul, chief executive of The Pure Gold Company, said: “Over 56% of the clients purchasing since the start of December are financial professionals, and they are deeply concerned about the effect this deadly disease might have on the financial markets.

“Most of our clients are concerned about the contagion effect of financial insecurity coming from one of the most powerful countries in the world and how this will continue to affect the global stock market, currencies and other investments. The traditional response to fear and uncertainty is that equities drop, currencies become volatile and gold increases.”

He added that people are frustrated and concerned with poor paying bank accounts, underperforming premium bonds and the potential for a stock market decline as the coronavirus fallout continues.

However, he said: “Whilst our clients’ gold investments have risen by almost 12 % since December, they are not purchasing gold or silver to make money. They require safety and security in an asset class that tends to offer protection (and increase) in times like this. The fact that our clients can liquidate out of their investment and convert their gains to cash very quickly (whilst not paying tax if they have purchased UK gold coins) is what makes gold appealing compared to other physical asset classes like property.”

Latest numbers reveal the death toll in China from Covid-19, the official name of the coronavirus, has topped 2,000, while worldwide, the number sits at 2,010.

However, the number of people testing positive for the novel virus dwarfs the death toll at 75,000.

Nitesh Shah, of ETF and asset manager, Wisdom Tree, said equity markets appeared to be brushing off the effects of the virus, until yesterday.

He said: “Apple Inc reported that its earnings will take a beating as the virus damages supply chains.

“Representing close to 5% of the S&P500, the single company has an outsized weight on investor sentiment.

“Gold is a natural port of call in times of investor anxiety. Closing above the psychologically important US$1600/oz for the first time in seven years, gold is showing its mettle in times of uncertainty.”


Source: Bloomberg, 19/02/20

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