This year, the situation in all financial markets is closely related to the coronavirus. During the acute phase of the epidemic, a significant part of the global economy was affected. But as with any other crisis, there is a winning side in the current situation. This includes defensive assets, which undoubtedly includes gold.
To understand how much the spread of coronavirus has affected the gold market, it should be said that the yield on the yellow precious metal in dollars since the beginning of this 2020 has already amounted to + 27%, and in euros + 22%. At the same time, there is still a lot of time left until the end of the year, which means that investors can count on continued growth in the yield on this asset.
However, the gold mining industry has largely suffered from the "coronacrisis". The fact is that when mining gold in mines, it is almost impossible to ensure social distance and adequate ventilation. Therefore, workers are at risk of infection. It is highly probable that in the worst case scenario, gold mining in some deposits may be suspended, which in turn will lead to a deficit of precious metals in the world market. Something similar already happened this spring during the peak of the epidemic.
Producers of gold coins and bullion also did not stand aside from the problems associated with the "coronacrisis". For example, in March this year, the three largest refineries in Switzerland, located in the canton of Ticino, were forced to suspend their work during quarantine. As a result, the gold market experienced interruptions in the supply of investment gold.
We must not forget about transport companies that specialize in the transportation of precious goods. Very often, gold coins and bars have to be delivered from remote regions of our planet. Delivery of precious metals to end customers must be carried out in compliance with all safety standards.
The situation around the virus can significantly affect the behavior and psychology of investors. If the situation in the world does not improve, then there may be a redistribution of capital from the stock market in favor of the precious metals market. Growth in money supply and debt burden will support gold's status as a defensive asset against inflation. However, the jewelry industry will be under attack, as jewelry sales are mostly offline. Therefore, the demand for gold jewelry may continue to decline.