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Gold’s Safe-Haven Qualities as Coronavirus Threatens Economy

Posted By Isaac Nuriani |

If you first thought the coronavirus outbreak was a case of “much ado about nothing,” you probably don’t feel that way now. Fallout from this global health emergency now includes the S&P 500 Index tumbling roughly 9% in just the last six days. Ouch!

So, is there any good news? It seems inappropriate to speak  of “good news” when the worldwide outbreak of a lethal virus remains in play. But there’s something all retirement savers can take some relief from: gold’s safe-haven qualities. Gold’s performance has been very positive amid all the economic uncertainty and market volatility.

If you owned gold during the last eight weeks, you’re enjoying the safe-haven qualities it famously provides. If you don’t own gold, this look at a true safe haven in action may convince you it’s not such a bad idea. There is no shortage of historical examples of gold strengthening against a backdrop of extreme economic turmoil. But there’s nothing like seeing it happen in real time.

 

Gold’s Run Has Been Revealing as Coronavirus Threat Grows

Pictures may not always be worth 1,000 words, but they can be very illustrative. Below you’ll find a chart that shows the performance of gold from December 31, 2019, to February 24, 2020. On December 31, that curious cases of pneumonia originating in Wuhan, China, was first reported to the World Health Organization (WHO). On February 24, 2020,  the WHO first declared publicly that the outbreak had the potential to become a global pandemic.

Performance of Gold, 12/31/2019 to 02/24/2020
(Chart courtesy of StockCharts.com)

Coronavirus could trigger global financial crisis

It’s reasonable to attribute the majority of gold’s rise over the past eight weeks to the burgeoning coronavirus outbreak. However, in the interest of full disclosure, I should note that gold’s sharp spike from Dec. 31 to Jan. 8 was influenced by  the U.S.-Iran military face-off at that time. In that one week, it’s my opinion the primary influence on gold was the rise in Middle East tension. The sharply positive response by gold to that separate crisis only strengthens the case for it as a reliable safe haven.

Devlyn Steele, Augusta Precious Metals’ chief economic analyst, is not surprised by gold’s dynamic reaction as coronavirus worries mount. “Gold’s surge at this time is just another example of the metal demonstrating its reliability as a safe-haven asset,” Steele noted. “In my opinion, retirement savers who lived through the 2008 financial crisis should have added gold to their portfolios long ago. Hopefully, anyone who has yet to do so is paying close attention to how the metal has been moving recently.” Steele is a 36-year veteran of economic analysis. He accurately predicted both the 2008 financial crisis and the subsequent surge in gold and silver.

 

Economist Says Coronavirus Could Cue Global Recession in First Half of 2020

Ultimately, it’s the coronavirus’s potential human toll that is most concerning. But the possibility that the health crisis could wreak havoc on an already-weakened global economy is very troubling, as well.

Economist Stephen Roach, former chairman of Morgan Stanley Asia, explained the situation in a recent article appearing at Project Syndicate. He said the outbreak arrived at time when the global business cycle is particularly vulnerable. “World output expanded by just 2.9% in 2019 – the slowest pace since the 2008-09 global financial crisis. And just 0.4 percentage points above the 2.5% threshold typically associated with global recession,” he explained. The unfolding of this “black swan” event as major economies already are struggling has Roach particularly concerned. “The risk of outright global recession in the first half of 2020 seems like a distinct possibility,” the economist wrote.

Attentive savers have noticed gold’s safe-haven qualities in action during the steady contraction of global output Roach described. Central banks – including our own Federal Reserve – are turning to accommodative monetary policy to fight it. And gold followed suit by rising in value. Since the Federal Reserve announced possible lower interest rates last summer, gold climbed roughly 25%.

It’s interesting to see, even when gold is already trending upward, the onset of a crisis can spike prices. This capacity further validates gold’s natural disposition to strengthen during turmoil.

 

Gold’s Safe-Haven Qualities Detailed in One-of-a-Kind Web Conference

Gold’s real-time reaction to the coronavirus’s severe economic threat is comforting for those who own gold. But perhaps you don’t own any gold yet. Or maybe you wonder if you own enough. Whatever your situation, we can help. Call award-winning Augusta Precious Metals at 800-700-1008 and speak with one of our customer success agents.

With Augusta, you can look forward to a genuine, no-pressure conversation about precious metals and gold’s safe-haven qualities. You’re excited to learn about the possibilities gold and silver can offer. And our team members are excited to discuss all the ways gold and silver can help you achieve your long-term goals.

Eligible retirement savers can attend a live retirement protection webinar hosted by Devlyn Steele. During Augusta’s Profit & Protect Web Conference, he’ll reveal real threats to your financial security. Most of these threats exist courtesy of Wall Street and the government. But he will do more than just outline problems. He’ll demonstrate how a gold IRA and other precious metals strategies provide essential safe-haven protection for your portfolio.

There’s no telling how much global economic hardship could be triggered by the coronavirus. Here’s one thing you do know: As economic conditions become less certain and markets more volatile, gold’s safe-haven qualities have demonstrated the capacity to help keep your money safe.

Augusta cannot guarantee, and makes no representation, that any metals purchased by a customer will appreciate at all or appreciate sufficiently to make a profit, and there is no certainty that any metals can be sold for a profit. The future value of the coins you purchase cannot be predicted. You could lose money. Don't purchase Augusta products with money you can't afford to lose. Prices may rise and fall over time or rapidly. Past performance of any coin does not guarantee future results. Premium coins are sold for more than the value of the precious metal they contain. Augusta's prices and buy-back prices are determined and controlled by Augusta. This purchase is speculative and unregulated.