FOCUS PRECIOUS METAL – the corona crisis

Gold Corona Krise

When the first press releases for COVID-19 came in January 2020, no one could have guessed what effects this new respiratory disease virus would bring. At that time, the whole world was still looking forward to the Chinese city of Wuhan, in which this disease was first diagnosed towards the end of December 2019. China quickly declared the virus an epidemic due to the high number of cases. The worldwide spread could not be stopped. We are currently in a crisis in Germany that has not existed since the Second World War. The corona crisis affects not only the lives of individuals, but also the entire European and international economy. And how is it changing the precious metals markets? Let us show the development with facts and figures.

Gold market: Corona drives demand

What has been happening on the gold market in recent weeks can be described as a wild roller coaster ride. But we are currently not at the end of the roller coaster, but in the middle of the way up. In fact, the price of gold rose a full 11 percent in just 24 hours (March 23 to March 24, 2020), from $ 1,498 / ounce to nearly $ 1,671 / ounce. The gold price is currently 1,481 EUR / ounce or 1,628 USD / ounce, as of March 26, 2020.

But before things started going up, the gold price went down steeply in the second week of March. The crash on the stock market triggered a so-called margin call effect. Dax and S & P500 suffered a price drop of more than 20 percent due to economic and political developments. Usually, equity investors flee in gold. But this time, liquid money was needed to pay off the losses. So gold was sold en masse. David Rosenberg, head of the Canadian investment firm Rosenberg Research, described the situation on the stock exchange market in his post on Twitter as a huge margin call „where even safe ports are no longer safe, with the exception of cash“.

But the descent did not last long. The reasons for this huge increase are obviously: increasing uncertainty among the population about how the Corona crisis will continue. Many see gold as the safe haven for their investments. As a result, the demand for physical gold increases significantly. In return, however, the offer decreases sharply. Recently there was a message in the market that the large Swiss gold refineries such as Valcambi or Pamp are closing indefinitely. Mines in South Africa announced to initially cease their work as part of the corona shutdown.

Another reason for the huge rise in gold prices was the Federal Reserve’s announcement to bring unlimited money to the markets. Which in turn could have a major impact on inflation. In order not to lose the value of money, many invest in gold.

The corona crisis therefore not only affects our individual lives, but also very strongly on the precious metal markets. And since no one knows how the Corona Virus will continue to spread, nobody can predict how the gold price will develop in the future. If a lot of money continues to be pumped into the market and the supply of physical gold continues to decline, we will probably go up with the gold price roller coaster in the next few weeks.

Silver market: will the silver price soon follow the gold price?

When gold runs out, many flee in silver. The price range between silver and gold is still relatively high. Nevertheless, the silver price has gradually recovered from the fall since the beginning of March, at EUR 13.32 / ounce and USD 14.35 / ounce. As of March 26, 2020

The extent to which silver now depends on industry was clearly felt in early March. The industry hit by the Corona crisis caused its demand for silver to drop significantly. As a result, the price suddenly plunged from $ 17.51 ??/ ounce to a low of $ 11.59 / ounce.

This case didn’t last long. The rapid flight of private investors into physical silver is driving demand. The minting establishments in particular benefit from this “silver run”. Private investors buy lots of silver coins, which led to a real sell-out at the points of sale. For example, the most popular 1 ounce silver coin „American Eagle“ by United States Mint was sold in March (as of March 23, 2020) 4.83 million copies. Last year it was just 850,000 coins.

Should the Corona crisis reach larger proportions, less silver can be expected in the short term. Thus, demand would continue to be imbalanced with supply, and would further drive the price of silver. Despite this aspect, the long-term future of silver as well as gold is uncertain.

Palladium, rhodium and platinum: something is happening here too!

In 2019, it was the top performer in industrial precious metals: palladium. With the use in catalysts for environmentally friendly cars, the demand for palladium was felt not to be satisfied. Now the tide with the corona crisis is changing tremendously. While palladium reached its highest level ever at the end of February at $ 2,856.50, it now costs around 20 percent less. The main reason for this is the automotive industry, which has been shut down by the crisis. Today, the price for an ounce of palladium is € 2,095 or USD 2,304 (as of March 26, 2020). In addition, as with gold, there is the margin call effect on the stock market.

As with palladium, this development also applies to platinum and rhodium.

At $ 738.84 or EUR 674.06 (as of March 26, 2020), platinum is around 12% less than in the previous year.

Nobody can currently predict how the prices of industrial precious metals will develop. It depends very much on the extent to which the corona virus spreads and with which measures the politicians react to it.

We stay tuned and are happy to inform you about further developments!