Coronavirus Crisis Pushes up Gold while the Precious Metal Faces Supply Chain Issues

Coronavirus has pushed the global economy into a recession of historic proportions, Goldman Sachs said earlier this week.
The Covid-19 crisis has made investors search and invest in safe haven assets like gold, market sources revealed in March, since the precious metal acts as a hedge for investors during times of geo-political and economic crisis.
Goldman Sachs has told its clients to buy the “currency of the last resort” on Tuesday when Gold continued to push higher.
The coronavirus crisis hit gold among other asset classes and caused a sharp fall of more than 12% from its early March peak of around $1,700 a troy ounce to $1,460 last week due to investors rushing for cash-is-king dollars by selling of all non-essential assets including gold.
Goldman’s recommendation coincided with the announcement of the Fed on Monday that it would buy unlimited amounts of government bonds (and had tasked asset manager BlackRock to handle this), which caused the dollar to fall and led gold to rise by more than 4%.
The investment bank furthermore said that gold was at an inflection point currently and could hit $1,800 over the next 12 months, which helped the precious metal to push even higher.
Looking at the global supply chain of the precious metal, three of the largest gold refineries globally announced on Monday in light of the virus threat that they have suspended production and refining of gold in Switzerland temporarily. The decision followed an order by local authorities to close non-essential industries to curtail the spread of Covid-19 in Switzerland. The refineries Valcambi, Argor-Heraeus and PAMP, are all located in the Swiss canton of Ticino, bordering hard-hit Italy, where more than 10,000 people have been killed since the virus broke out in Europe.
Switzerland is one of the most important hubs for gold and precious metals refining. The three refineries between them process around 1,500 tonnes of gold a year in Ticino, which is a third of total global annual supply, as well as other precious metals such as silver. Switzerland has over decades been one of the major hubs for these activities including for gold trading in general.
Global recession
Besides Goldman Sachs, Morgan Stanley economists last week also declared that the pandemic has triggered a global recession, with the debates now focusing on its likely length and depth.
Economists threw away their forecasts that the world could avoid tumbling into recession a day after President Donald Trump conceded the U.S. slump alone is set to be “a bad one”, for the first time since the financial crisis.
Goldman Sachs predicted a weakening of growth to 1.25%, while Morgan Stanley said a worldwide recession is now its “base case”, with growth expected to fall to 0.9% this year.
Sudden stop for US economy
“Over the last few days social distancing measures have shut down normal life in much of the U.S. News reports point to a sudden surge in layoffs and a collapse in spending, both historic in size and speed, as well as shutdowns of many schools, stores, offices, manufacturing plants, and construction sites. These developments argue for a much sharper drop in GDP in Q1 and Q2,” Goldman Sachs said last week.
The firm expected declines in services consumption, manufacturing activity, and building investment to lower the level of GDP in April by nearly 10%, a drag that the company expects to fade only gradually in later months.
“We now forecast quarter-on-quarter annualised growth rates of -6% in Q1, -24% in Q2, +12% in Q3, and +10% in Q4, leaving full-year growth at -3.8% on an annual average basis and -3.1% on a Q4/Q4 basis,” Goldman Sachs said.
Meanwhile nearly 3.3 million Americans applied for unemployment help last week, triggered by Covid-19, amid a widespread economic slowdown. This unemployment number is around five times higher than the previous (sad) record that occurred in 1982. The filing for unemployment aid numbers generally reflects the pace of any slowdown (or upswing) of the economy…