A record number of Americans have filed for unemployment in the wake of the coronavirus pandemic – which comes just as the USA is declared the world’s hotspot for the virus, with more cases (nearly 86,000 or 16% of the global total) than China and Italy, the two nations previously worst hit.
The number of people filing for unemployment has surged by three million, which is a number four times higher than the previous mass unemployment figures. The US Labor Department statistics show jobless claims have peaked at 3.28 million in the last week. This comes in the wake of the Federal Reserve slashing rates and Senate approval for a $2 trillion economic rescue package.
The portfolio manager of a specialist fund focused on precious metals says that this data is positive for gold and is likely to support a new bull run. Midas Fund’s Thomas Winmill explained,
“When you have high jobless rates, it means the government is likely to continue an accommodative monetary policy, keeping interest rates low and trying to stimulate business activity and get people back to work. Low interest rates tend to result in a negative real-interest-rate environment….That is normally very good for commodities such as gold. It’s hard times for people but can be very good for investing in commodities, relative to financial investment to say fixed income.”
Some experts believe that the jobless claims will continue to increase over the coming weeks as unemployed workers are currently struggling to get online or speak to someone over the phone as systems continue to be overloaded by the sheer volume of applicants. This means that we could see further spikes over the course of the next few weeks, further strengthening gold’s outlook.