The price of gold rises more than $1600

The price of gold rises more than $1600

The fear of the coronavirus spread to the world economy has caused the price of gold also to increase significantly – although it is not the only reason why central banks are buying more and more gold. The cost of gold reached a maximum of seven years at $ 1611 per ounce on the London market on Wednesday. Global stock markets and returns on government bonds traded higher against the falls of the beginning of the week. David Govett, from Marez Spectron, says that there is a lot of money from stock markets that seek to find refuge in gold.

Coronavirus is still the main fear factor in the global market

Commodity prices remain bearish

Wells Fargo, an American multinational financial services company, has been negative on commodities for the past four years. Because of the commodity supercycle bear market, commodities are not currently part of the company’s strategic asset allocation models. A commodity bear supercycle is a multi-year period when commodity prices struggle to move higher. The market entered the current bear supercycle in 2011. Since most commodities remain oversupplied in 2020, companies believe that the bear remains intact. Gold is separating itself from the pack of stable returns. It indicates that the end to a bear market is near.

John LaForge, head of Real Asset Strategy at Wells Fargo, said that bear getting old is a positive sign. This is the point in the bear supercycle when select individual commodities typically begin separating themselves from the pack. It is happening to gold now, and it may be the first sign of that end. Gold prices per ounce, returned nearly 20% in 2019, and it has been acting quite well, no matter its news flow, LaForge said.


Coronavirus is still the main fear factor in the global market

Gold prices advanced towards a peak of almost seven years. This is a fear of potential coronavirus ravages on the global economy increased interest in refuge assets. Gold remained firm, even when European actions hit a record high following the decline of new cases of the coronavirus in China.

Also, the US dollar reached a peak of more than four months against a basket of currencies. This made gold more expensive for holders of other currencies.

Besides, the coronavirus caused interruptions of the supply chains in China. For example, Apple has announced that this quarter its revenues will be impaired by the closure of stores in China and the impact on iPhone production and, in fact, also that the iPad Pro may not arrive in the first half of 2020.

According to Reuters, the latest news on the fall in Apple’s shares was the trigger for fears. iPhone manufacturer cut down the production, as demand slowed down. Investors went back to the safety of precious metals.

The outbreak of the coronavirus aggravated the fear of the crisis in markets. The deadly virus has already caused the death of more than 2000 people and infected more than 75,000 so far. There is concern that the infection will spread more widely across the world.

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