What Rising Prices of Gold Say About the Global Economic State
Renewed fears that the coronavirus caused the drop of oil and metal prices, while gold rose toward $1,700 an ounce. Gold prices jumped over 2% today. They marked their highest in over seven years. Spot gold rates rose to as much as $1,678.58 an ounce.
David Lennox, a resource analyst at Fat Prophets in Sydney, says that the volatility seen in the coronavirus event is creating angst in the market. Oil prices are weakening, and investors are leaning toward a safe-haven, and that’s gold.
Jigar Trivedi, a research analyst at Anand Rathi Shares & Stock Brokers, said that coronavirus has continued to spread in Iran and South Korea. The virus outbreak could hit economic recovery sharply. Safe-haven demand has reached an all-time high again, reports IMF.
To escape riskier assets, investors are seeking safety, sending gold prices to 7-year highs. Bullion prices have taken off this year, growing almost 10%, as concerns over the virus deepened, and speculation rose that the U.S. Federal Reserve will loosen monetary policy if the global impact worsens.
Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore, says that the spread of the Covid-19 to Italy and South Korea is threatening the rebounds in asset prices. That fear is driving gold prices higher. Upward momentum is secure, and interest in gold is set to remain high until the situation reduces.
The sharp moves in prices affected shares of some of the largest commodity companies. Moreover, Newcrest Mining Ltd., Australia’s largest gold producer, climbed as much as 5.4%. BHP Group, the world’s biggest miner, slumped more than 3%. S-Oil Corp., and a South Korean oil refiner, fell 2.6%.
The Prices of the metal have Reached Seven Years High this Week
The recovery of gold seems endless. Almost every day there is a new record of the price of gold. The rally does not seem to want to end. The precious metal recorded the highest rate in history several times this week. The precious metal prices reached more than in June 2016, after the Brexit vote in Britain, more than during the Russian annexation of Crimea or at the height of conflicts between Donald Trump and Iran.
Investors are particularly concerned that the coronavirus may have a more severe impact on the global economy than is currently expected, so they are turning to gold. Concerns seem to have gained an advantage again, said Commerzbank analysts.
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