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Coronavirus To Boost Gold Price

Jan Nieuwenhuijs profile picture
Jan Nieuwenhuijs


  • My concern is that the virus has set in motion a domino effect in a brittle world economy.
  • The coronavirus will cause the economy in Europe to suffer a significant setback (as in China).
  • When economies contract, stock markets plummet, and banks fail, gold offers the best protection.

As the coronavirus is spreading around the world, its ramifications on the economy will boost the price of gold.

The coronavirus is swallowing the world. What started in January as a local issue in Wuhan, China, is now a global problem. Although there remains uncertainty around the health hazards of the virus, its impact on the world economy is clear. Early on, we witnessed large segments of the Chinese economy grinding to a halt and supply chains collapsing. As the virus is spreading, major economies will likely suffer the same fate as the Chinese. Across the globe, schools and companies are closed. Events are canceled, and traveling is brought to a minimum. People that can work from home are asked to do so.

Government officials are taking precautions as well and for a good reason. In Iran, 23 Members of Parliament have been infected, and one of Ayatollah Khamenei's top advisers died of the virus. On Wednesday, the first case of corona in an EU institution was confirmed.

The European Central Bank called off a meeting on Tuesday out of fear for contamination, and the International Monetary Fund decided to change the spring meetings to a virtual format (video conference). In France, President Macron ordered to confiscate all stockpiles of face masks and to nationalize production, just before the news came out by the World Health Organization, that "the mortality rate for COVID-19 [coronavirus] is 3.4% ..., higher than previous estimates of about 2%."

My concern is that the virus has set in motion a domino effect in a brittle world economy. After the Great Financial Crisis, central banks have over-stimulated the economy through quantitative easing ("printing money") and extremely low interest rates. Unconventional monetary policy has spawned asset bubbles, zombie companies and banks, decreased productivity growth, and global

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Jan Nieuwenhuijs profile picture
Jan Nieuwenhuijs is a financial researcher and gold analyst at Gainesville Coins. Nieuwenhuijs mostly writes about gold, covering topics such as the global physical gold market, derivative markets, central banks' gold policy, and the international monetary system.

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Comments (60)

So volumes are available, I guess, in New York, London, Hong Kong and Shanghai Au markets, lot of valuable data there along with GLD et al trading data?!!
So much information along with official government holding records.
Seems like a treasury of pretty solid data in various sources.
Another fascinating article on your Au expertise! my compliments.
Your documentation of Au movements east to west and back again included Great, believable data sources. how about Au movement from central banks? ~40 years ago around 1978, the imf make a set of large bullion sales as did UK ~20 years ago. now when central banks either buy or sell Au, are the transactions publicly disclosed or confidential? Surely, inlows and sales by central banks are a critical part of how much Au is into or out of the market as well as private sales in Hong Kong, Shanghai and London. Any idea of the governmental inlows and sales in 2020?
Lake OZ boater profile picture

Perhaps of interest. See: 13MAR20 "Infographic: Central Bank Gold Buying and Gold Repatriation"

Thank you LakeOZ boater,
That was so very infoormative. This is really interesting. So many of the biggest repatriators are EU AND West/central Europe not the far east.
LakeOZ boater
this is set of puzzles which resolve/make a coherent solution as more layers of info come into view. Vennezuela repatriated bullion with which to pay Russia, so that flow was eventually east but not to China or India but Russia government.
Expect bank, governmental holdings less labile than private holdings. I suspect short-term fluxes are a very tiny part of these holdings which are reflected in daily pricings which move the fluctuating bullion pool but ordinarily never move most bullion which just sits in one place for decades. what a picture!
thanks again, fascinating.
Another support for mining companies comes from the lower price of oil, considering the large part that energy represents in the cost of extracting gold.
I see four Italian banks at the end of the list in your table. Not good, with the rapid extension of Coronavirus in this country.
07 Mar. 2020
Excellent and concise report. Those of us who have waited since 2008 for the other shoe to drop will be rewarded. It was never clear what what would lead to the day of reckoning but a black swan event has occurred and exposed the irresponsible and profligate actions of governments and Central banks around the world. It was never difficult to envision that gold, not fiat currencies nor crypto currencies would be an imperative to own. The price action will remain choppy and miners still do not reflect their true intrinsic value as their profits soar. Investment by those who have chased up the Nasdaq and Dow, combined with the CB’s continually adding to their stockpiles will result in an increase in the price of gold miner’s.
Own bullion and miners. It has been painful since the lows in Dec 2015. The trajectory however was never in doubt....
my IRA is in Gold and Silver!!!
Gunne profile picture
=> The coronavirus will cause the economy in Europe to suffer a significant setback (as in China).

So, bullish gold and bullish USD, Jan?

=> Central banks will not tolerate deflation
What are they going to do about it? Another round of QE?

They are part of the deflationary forces to begin with...
I can't be convinced that they don't know while it's for everyone to see.

When you lower rates, you deduct the economy of income, which is deflationary.
When you add income to an economy, inflation will pick up.

Keep on doing the same thing, hoping for another outcome.
They must be Dems...Rigging Bernie for the second time, hoping for another outcome.
Gunne profile picture
Unbridled democracy rules.
There is no need to 'guide' an election.
The people will have their say anyway.
I thought that mw. Warren was quite feisty, now she still needs to think about who she will support? Orders, mw. Warren, orders mw. Warren, from the top...show us you got some 'cojones'. And don't forget why Rocky was so popular, the more stuff was stacked against him, the more most wanted him to win...
Not pro or con Bernie, but i'd like a showdown between the Donald and Bernie. They both have something 'real' about them.
Jan Nieuwenhuijs profile picture
Hence I said heli money or straight out devaluation vs ie gold.
Gunne profile picture
Helicopter money tests wouldn't surprise me, eventually.

Any reason why you mention Europe, China, and not the US?
It seems like it's difficult to contain, no matter where you are.

@Jan Nieuwenhuijs What gold miners pay a decent dividend?
Lake OZ boater profile picture
@TomJeff asked: "What gold miners pay a decent dividend?"

It depends on your definition of "decent." Using a common yardstick , as of 3-6-20, the 10- year treasury note yield closed at 0.74%.


IMHO: There is a lot of idiosyncratic risk in the gold miners sector. You might want to consider the benefits of a 'diversified' portfolio of gold miners available through targeted ETFs.

The gold mining sector is not usually targeted by dividend-yield investors. Precious Metals investors generally want to hold these stocks because they tend to be leveraged plays on the price of the underlying metals. (SEE BOOK PASSAGE BELOW)*

You can find an ETF screening tool here:


FYI...when ranked by dividend yield, Global X's Gold Explorers ETF (GOEX) is #1.

At the current price , Etfdb.com is reporting an annual yield in the neighborhood 1.7%

Finviz.com is reporting a GOEX dividend yield around 1.5%


Yahoo Finance is reporting a GOEX yield around 1.9%.


Versus a conservative investment in a 10-year treasury note, these are higher.

Here is the link to Global X's website where you can find specific information on GOEX.


Hope this helps get you started with your due diligence.

Disclosure: I am long RING.
*Found in Chapter 4 titled "The Perfect Portfolio" in William J. Bernstein's book 'The Four Pillars of Investing' (link below) ...

"Precious metals stocks—companies that mine gold, silver, and platinum—historically have had extremely low returns, perhaps a few percent above inflation. Not only that, they tend to have very poor returns for very long periods of time and are extremely volatile. Why expose yourself to this asset class? For three reasons..."

"First, precious metals stock returns are almost perfectly uncorrelated with most of the world’s other financial markets. During a global market meltdown, they are liable to do quite well. For example, from 1973 to 1974, gold stocks gained 28%. We don’t have exact returns for gold stocks from 1929 to 1932, but anecdotally, they seemed to have done quite well at that time as well, when everything else was getting hammered."

"Second, precious metals stocks will be profitable if inflation ever again rears its ugly head. During such periods, “hard assets” such as precious metals, real estate, and “collectibles” (e.g., art, rare coins, etc.) tend to do very well."

"And third, this asset’s random volatility will work in your favor via the re-balancing mechanism. If you can hold precious metals stocks in a retirement account and trade them without tax consequences, the natural buy-low/sell-high discipline of the re-balancing process should earn 3% to 5% per year in excess of the low baseline return for this asset.

Be forewarned that this process takes discipline, because you will be continually moving against the crowd’s sentiment. While you are selling, you will be reading and hearing some very compelling reasons to buy, and when you are buying, you will find that others consider it an act of lunacy."

Dunno nuttin?
Now those gold ETF "insurance policies" can start making money, rather than eating maintenance fees. Who knew it would have been a virus that triggered it?
BlackBettyschild profile picture
Oh wow another bullish gold article going to 5000 soon get long world ending.
07 Mar. 2020
Where in the article did you read gold going to $5000? Perhaps you read another article and mistakingly responded in the wrong post?

Of course gold is bullish. Those of us who have owned gold since it was $250 while the Bank of England sold 1/2 of their lot, or those of us who bought since Dec 2015 when it was 1050 per ounce always knew what would occur. None of us know how high the gold price will go nor do we know the speed of the trajectory. However, for those of us who have expertise in Macroeconomics, it has always been clear what would occur. One does not need to be a genius to look at 2008 world debt of 170 trillion now 250 trillion with no tools in the shed for CB’s and governments around the world as real interest rates continue to fall well below zero and QE never ending that this would not end well. I really do not care if gold goes just to 2000 (it will) or 5000 (I have no idea). What I do know is that this will be painful for far too many around the world, in which billions are already disenfranchised economically as the divide between rich and poor has widened since the 1970’s. This will not end well.....with the social economic consequences significant. For those of you who believe in Science (Climate Change) as I do with my doctorate degree, the perfect storm is occurring between the perils of climate change and the economic reckoning awaiting the irresponsible policies of governments around the world.

Therefore the issue is not whether gold goes to 5000 or whether one defines themselves as a gold bull. These are mere distractions of the real risks that are forthcoming over the next several decades.
BlackBettyschild profile picture
I was told a long time ago by a famous gold investor whenever you read anything positive in the headlines about gold it's time to sell. Cheerleading got a little bit too much.
Wondering if the top is not in and gold and the next move under a 1000.
BlackBettyschild profile picture
Oh yes it will get to 5000 eventually
05 Mar. 2020
My head has been in gold since 2017. Finally my trade is paying off, and it's only begun.
E.D. Hart profile picture
Your analysis is spot on; my thinking very much concurs.
Sadly most investors do not hold any gold or gold miners as part of their portfolio as insurance against risk or for potential appreciation. After being conditioned for decades to avoid the "risk" holding gold poses old habits are hard to break.

I would recommend taking a look at PHYS for gold, PSLV for silver, or CEF for a combination of both and avoid things like SLV and GLD which are sponsored by commercial banks and investment houses.
@MetalsMinor You are right. The custodian of GLD is HSBC and how many times have we seen them in the news for fraud? They get a slap on the wrist fine and its business as usual. There are other issues with GLD as well such as the ZJ6752 GLD bar incident, subcustodial audit loophole, sketchy insurance and even more.
Idkmuch profile picture
@clevakev you read my mind lol
Renov8 profile picture
So, where is one to put some cash and look for a ten to hundred fold increase...o r o?
@Renov8 - Bitcoin or GBTC?
E.D. Hart profile picture
@Renov8 beaten up Uranium mining stocks....
Idkmuch profile picture
gold seems obvious now, but im just not a gold guy, i rather hold land, or stocks that own a lot of land
"directly devalue their currencies against gold as they did in the 1930s".

How could this be done now? In the 30s currencies were gold backed/linked but none are today, AFAIK, so surely it would just be beggar-thy-neighbour devalutions, achievable by e.g. helicopter money that you mention.
Jan Nieuwenhuijs profile picture
Good point. They could do it by simply printing money to buy gold. Do you think countries that devalued against gold in the 1930s had no option to devalue against other currencies than gold?
@Jan Nieuwenhuijs

Not sure if I'm fully understanding your question. Most of the key currencies in the early 1930s were gold backed and when they did devalue (i.e. came off the gold standard and re-entered at a lower rate) they only gained a temporary advantage (then WW2 came along, then Bretton Woods, then default on USD/gold link in 1971). There's a useful reminder at zerohedge:


(note the Smoot-Hawley tariffs - rhymes with current tariff/protectionism?)

The current scenario is not dissimilar - high debt and competitive devaluations, as Trump has complained about in regards to the USD (in an attempt to get the Fed to lower int rates). There's much debate about whether China and/or Russia (and perhaps Germany?) might introduce a gold standard but you're very likely better informed than me on that subject!

Personally, my current thinking is the debt situation will deteriorate further, an event will occur (be engineered?) to trigger or provide an excuse for a 'reset' and that's when a new currency order will come to fruition.
Jan Nieuwenhuijs profile picture
I don't think China, Russia or Germany have a desire to shift to a gold standard unless they have to. Although they are "preparing for Plan B" www.voimagold.com/...

Regarding devaluing, a country can devalue against "anything." Any thing has its pros and cons. I will read your link.
Stoneclone profile picture
I look longer that a virus. The trend changed around April 2019. Long and stay long until the trend changes.
Would be interesting to see a graph which plots gold price vs real
interest rates and/or change in real rates.🎆
Stoneclone profile picture
@unknown12 Negative real rates, which we are in now, .9 nominal on the 10 year, is not good. It's not only totally irrational, but will threaten the dollar hegemony established at Jekyll. This is a catastrophic occurrence should the worlds reserve currency lose its status. I couldn't even begin to predict the ultimate outcome.
The website Inflation.us posted one on Monday. I promptly got Gld calls.
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