Gold Soars as Coronavirus Epidemic Bites

Author: Corey McDowell - Economics Editor

Published: 24 Feb 2020

Last Updated: 2 Feb 2023


Gold, alongside other precious metals, has seen a spike in price levels over the last week which has broken more all-time price records.

Gold, alongside other precious metals, has seen a spike in price levels over the last week which has broken more all-time price records. The Sterling price of gold broke through the £1,300 per troy ounce mark over the weekend, beating the previous highs seen in September last year. The euro record price has been consistently beaten for the last fortnight and is currently trading at €1,560.80 per ounce. Priced in US dollars, gold hit levels not seen since early 2013, hitting highs of $1,689.65 per troy ounce.  

Why have gold prices spiked over the last week? Obviously, the coronavirus outbreak has stunted the Chinese economy which is now filtering through to other parts of the globe. Factories have shut, transport links have been disrupted and workers have stayed at home. As a country with a sizeable trade surplus, China is responsible for an enormous proportion of manufacturing and assembly of consumer goods to other countries, and this is now beginning to bite into global supply chains. Cases have been reported in South Korea, Iran and Italy, and rather worryingly on cruise ships too. 

These developments dominated the agenda at the G20 finance meeting in Riyadh, Saudi Arabia, but is this the only reason for the ascendancy of gold? A presentation to these policymakers by The International Monetary Fund (IMF) forecasted that the coronavirus crisis would shave 0.1% off global growth, which could be considered an optimistic figure at best. Global economic statistics were already looking precarious before the emergence of the virus, which policymakers have been warning about. Should another recession be immanent, they plan to use the same methods as in the previous financial crisis in 2008, namely slashing interest rates and initiating quantitative easing. They have been very open about their intentions, but will these actions work next time? Gold skyrocketed then, so it should be no surprise that it is rising now. 

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