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Fears of a second wave of coronavirus cases caused stock markets to fall last week, causing gold prices to gain in all major currencies.

Stocks Fall

The New York stock market suffered its worst fall since the record drop in mid-March when we saw country-wide lockdown restrictions to prevent the spread of COVID-19. The UK stock markets also experienced a drop, seeing four consecutive days of falls last week and oil prices also slumped due to lack of demand as the country continued with lockdown restrictions.

Gold prices have reacted positively, climbing by around 3% last week and sitting at £1,386 per ounce in the early hours of this morning (15.06.20).

Where will gold go from here?

The Financial Impact of COVID

Some commentators believe that the stock market rallies experienced previously were due to premature hopes in ending the current pandemic and financial crisis. However, renewed worries about a COVID-19 infection resurgence hitting many countries doused these hopes, with some evidence this may already be occurring in the US and China.

The USA is officially the worst hit country by COVID-19 - yet increasing pressure from Trump to get America returning to normal life and work, cases are expected to grow, making economic recovery even more difficult and meaning cloudy forecasts for the world economy.

The USA is now officially in recession, as stated last week, marking the end of ten years of economic expansion for the country. The Fed is reported to be expecting that the US economy may shrink by around 6.5% this year, with employment hitting highs of around 9%. Interest rates are also expected to remain low for the next couple of years, hinting at the length of time the US economy could still be impacted by the coronavirus pandemic.

Safe Haven

As figures show coronavirus cases are still increasing in many countries, governments around the world are facing difficult choices. To aid financial recovery by decreasing lockdowns? Or protect the health of their people by keeping lockdown restrictions? Either way, it’s obvious that the financial impact of COVID-19 will be felt for years to come, and we will no doubt see more investors turning to gold to protect their family’s future.

As always, our old friend gold is always there - a store of value in an ever-changing world.

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This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.

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