There have been a lot of similarities made between the 2008 financial crisis and this current coronavirus-fueled bear market. While there are some differences, mainly in that the 2008 crisis was caused from within the financial system whereas this market has been caused by an external event that couldn’t be predicted, this coronavirus has definitely served as the catalyst for this major downturn in the market. Gold prices shot up as much as $100 per ounce on Tuesday when Goldman Sachs warned investors that now might be the time to stock up on Gold while they can.
The precious metal shot up significantly on Tuesday as worried investors flocked to traditional safe havens to protect their wealth. At the same time, some companies have had to shut down mines and refineries amidst the ongoing coronavirus pandemic, something which would only reduce the total supply of Gold available for the market. Prices ended the day up as much as $1,660 per ounce, with Gold having shot up almost 8.4% in one of its biggest single-day moves in history.
“We have long argued that Gold is the currency of last resort, acting as a hedge against currency debasement when policy makers act to accommodate shocks such as the one being experienced now. We are beginning to see a similar pattern emerge as gold prices stabilized over the past week and rallied as the Fed introduced new liquidity injection facilities with this morning’s announcement,” wrote Goldman Sachs analyst Jeffrey Currie alongside other experts from the investment bank. “We believe this will likely lead to debasement concerns similar to the post [Global Financial Crisis] period.”
Goldman Sachs also has a 12-month price target of around $1,800 per ounce for Gold, although the possibility of prices shooting much higher are a significant possibility as well. Gold had briefly touched a seven-year high around $1,700 a week ago before tumbling back down to $1,450. Other precious metals have seen similar surges, including silver and platinum. Palladium, a sister metal to platinum that’s used in catalytic converters, has surged well past Gold in becoming the most valuable precious metal on the market.
Despite best efforts from the Trump administration and the Federal Reserve to stimulate the economy in the face of this crisis, investors are still paranoid that the economy will continue to falter as further cases are reported. While shutdowns of non-essential businesses and even lockdowns have been ordered in an effort to slow down the infection rate, they can’t be shutdown forever. Sooner or later, small businesses will have to open again, and when they do, the U.S. could see another surge of coronavirus cases.
At the moment, there are just under 425,000 confirmed coronavirus cases around the world, with 55,000 of them coming from America. At the moment, the U.S. is third when it comes to total confirmed outbreaks, falling just behind Italy and China, although at this rate, it would easily become number two or number 1 in total cases.
If there’s a silver lining to this situation, it’s that stocks for Gold and other precious metal mining companies are likely to surge in the future. Industry giants such as Newmont (NYSE:NEM) and Barrick Gold (NYSE:GOLD) could see significant gains over the coming months.