Was it really only last Thursday that stock markets across the world were flashing happy green signals?
Here in Oz, the ASX 200 closed Thursday at a record high. Its second new high in a row.
That performance, in the face of a looming global pandemic, had us scratching our head.
Did the markets know something we didn’t? Would the coronavirus be contained within China? Better yet, was a cure imminent?
The number of infections and the death toll from COVID–19 continue to rise. More than 80,000 people are now officially infected. Some 2,700 have died. Though with China’s dodgy reporting practices, the real number is likely far higher.
Most concerningly is the rapid increase in cases outside of China.
You’ll find plenty of hysteria creeping into the mainstream headlines. We’ll do our best not to fan those flames.
In a nutshell, the coronavirus looks to have gotten a secure foothold now in South Korea (900 cases), Italy (200 cases), and Iran (12 deaths)…among others.
That the rapid spread inside these countries took authorities by surprise is alarming. As are the statistics coming out of Iran, which suggest more than a 20% fatality rate.
Does that mean the Iranian strain is more deadly? Or that China’s death toll has been grossly underreported?
Neither answer is particularly calming.
Which explains the two day market rout that’s wiped some US$1 .3 billion from global equities. Though, if futures markets are to be trusted, tomorrow (tonight our time) should see bargain hunters hand the major US and European indices another day of gains.
In the meantime, haven assets have been amongst the few winners.
Gold Price Up Amidst Coronavirus Fears
Gold is one of the standout winners. You can see the year-to-date price chart below (in US dollars):
Gold is up 9.3% since 1 January in US dollars.
In Aussie dollars gold has done even better, up 15.9% so far in 2020. You can thank the slumping Australian dollar for that.
If gold continues to rocket higher on fears of the coronavirus select gold stocks should see gains that dwarf gold’s price rise. That’s because gold miners are leveraged to the price of gold. Most of any price gains go straight into their profit margins.
But not all gold stocks will do well…even if gold breaks through US$1,700 per ounce as now looks likely. Some will even lose money.