After four days of massive gains in the stock indices, markets pulled back on Friday, giving gold a boost, as renewed fears that the coronavirus may be continuing its insidious spread are taking over.
In its ongoing contagion, the coronavirus has now shown 31,211 validated cases in China and a minimum of 637 deaths as of Friday morning, although there is a possibility that the rate of infection is slowing said World Health Organization officials on Friday.
Despite the decline, “it’s right now too early to make predictions” about the course of the epidemic, said Dr. Michael Ryan, executive director of W.H.O.’s Health Emergencies Program. He warned that China is “still in the middle of a very intense outbreak, and we need to be careful.” “Nearly 3,700 new cases of coronavirus in a single day is nothing to celebrate,” he added.
Looking at the numbers, Tedros Adhanom Ghebreyesus, director-general of WHO, said during a news conference at the agency’s headquarters in Geneva that the slackening speed of additional cases is “good news” but warned the public not get too optimistic about the new data.
“The numbers could go up again,” he told reporters. “As you know, epi curves can zigzag,” referring to a diagram that shows the distribution of cases over time.
Meanwhile, investors fled stock markets overnight and intraday, sending gold higher, as safe haven assets seemed more appealing for now.
Since interest rates are so low, gold is more alluring than other assets, and until there is an clear sense that the coronavirus will be curtailed and that global trade is on track, investors may be likely to use idle cash or even pull money from stocks to invest in asset classes like gold for their apparent protective qualities.
Stephen Innes, chief market strategist at AxiCorp Financial Services Pty, explained that the coronavirus-driven “sell-off in equity markets will likely drive gold demand over the short term. The more rapid pace of contagion will represent another significant headwind to global growth, bullish for gold.”
Gold futures are up 0.43% Friday, with a similar rally in ETFs as well. The SPDR Gold Trust ETF (GLD) is up 0.41%, while the VelocityShares 3x Long Gold ETN (UGLD) is up over 1%.
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