Although this may seem like a new disease, coronavirus was first identified in the mid 1960’s. COVID-19 is a mutated version of this virus, which is why there still hasn’t been a vaccine created for it yet.
Not only have many people been affected by this global “pandemic”, but so have various businesses and industries, especially those that are based in China.
China and Its Treasures
China is one of the richest countries in the world and has the fastest growing economy. This is because it is rich of natural resources, which are worth an approximate 23 trillion dollars.
In fact, the People’s Republic of China is the biggest gold producer in the world. It had recently overtaken South Africa, who had held the title for more than a century.
People started to take notice, and China gained both domestic and foreign investors. Their supply seems to never stop growing as it doubled in 2014. As of May 2018, China was ranked for having the 6th largest holdings in the world (aside from the International Monetary Fund) with 1,842.6 tons.
Though this may seem like a large amount, some analysts believe that the actual amount of reserves is more than what’s been reported. Speculations have risen due to the fact that the People’s Bank of China hasn’t revealed an accurate amount in years.
Coronavirus and the Stock Market
The country of China currently contributes 30 percent of consumer demand as of 2019. The sources of demand have also increased since the establishment of the Shanghai Gold Exchange (2002) and legalization of private gold investment (2004).
However, the Chinese economy and gold market may be negatively affected with the recent COVID-19 outbreak. It is expected for China’s GDP may suffer, considering that there is a decrease in economic activity.
This may increase uncertainty in investors, resulting in flight to quality flows into gold. In fact, it has been reported that there was a sudden increase of trades at the Shanghai Gold Exchange after Chinese New Year.
As stated earlier, coronavirus is nothing new to medical experts. The stock market has already dealt with a previous case of other serious diseases (such as SARS, Ebola, and avian flu). Investors shouldn’t worry too much, especially when you take into consideration that the US stock market generated the best annual return just last year.
Based on how the stock market had dealt with past epidemics and diseases, the effects should only last temporarily. Fortunately, the COVID-19 is gradually starting to slow down.
Although it is hard to be completely sure, it is likely that China’s consumer demand will soften. However, the demand solely depends on how long the COVID-19 epidemic lasts and how it has affected economic growth.