At a people level, coronavirus is forcing individuals and families to self-isolate for a period of two weeks if they show signs of the disease. Schools and universities have been closed throughout Iran and Italy and individual schools and universities closed in affected regions elsewhere in the world. Some hotels and several cruise ships have been locked down, sporting events have been cancelled or postponed, hundreds of flights have been cancelled and there are talks of ushering in emergency measures to relax sick leave laws, health and safety requirements and policing of anything but major crimes.
While this is inconvenient on a day-to-day level for many, it also wreaks havoc on the economy as we have seen above – couple this with profit warnings, less consumer spending, less travel and global supply chain impacts and it’s easy to see that economic policy is also going to be affected.
We have already seen forced changes to monetary policy due to coronavirus – in China, the government announced a series of rate cuts in an effort to try and stimulate the economy in late February. On 04 Feb, the People’s Bank of China (PBOC) attempted to restore confidence by investing 1.7 trillion yuan / $242.74 billion in open market operations during Monday and Tuesday trading.
On 03 March, the Federal Reserve took the highly unusual step of making an emergency slash to rates, with the New York Times reporting, “In an extraordinary attempt to contain the coronaviruses economic fallout, the Federal Reserve slashed interest rates on Tuesday as policymakers unanimously approved their biggest one-time cut — and first emergency rate move — since the depths of the 2008 financial crisis.”
Gold prices and coronavirus: a timeline
Gold prices have been very positively influenced by the economic uncertainty and dwindling risk appetite with safe haven demand booming:
19 Feb: Apple says it won’t hit profit goals as a result of coronavirus, gold gains around 1% in trading, peaking at $1,604.30.
19 Feb: CitiGroup revises its gold forecast, with analysts advising gold would reach $1700 in the next 6 to 12 months, and $2000 in 12 to 24 months.
20 Feb: Reuters reports that gold prices have reached a seven year high, peaking at $1,622.19 – a level last seen in February 2013.
27 Feb: Bank of America Securities reports that the escalation of coronavirus to a pandemic would push gold to $2000.
02 March: TD Securities revises gold forecast upwards to $1700 by the fourth quarter with the potential for $1800.
05 March: Gold up sharply to $1,667.40 as coronavirus fears continue to stimulate safe haven demand