At the beginning of Feb, North American, European and even Chinese stocks rebounded with the S&P 500 closing at a new record high due to the better U.S. economic data and the support measures from China to mitigate the coronavirus’s impact, also Coronavirus was only expected to have negligible effect on US and global economic growth. Later Gold price rose to $1600 as the coronavirus cases in South Korea jumped with the market started risk-off mode amid concerns about global spread of coronavirus. Gold up sharply to 7 years highest level to $1680 level on safe haven demand. During the last week, the equities, oil, commodities, dollar even with precious metals stocks tumbled, the 10-year US Treasury yield set new record low, and the S&P was 4.4% lower at the end of Feb which is the worst day since 2011 bringing 12% down since peak in Feb, and the Bloomberg Commodity Index fell to the lowest in 33 years. The precious metals stocks rose up 10% with metals price until the last week, during when they are also under the pressure of risk assets selling, down 20% from the peak.
Apparently, the economists’ conclusion that the impact of coronavirus would be negligible to US economic growth and only short-lived in China was incorrect. With the risk of recession likely rising, negative rate environment, more easing from central banks and the black swan events such as Russia and Saudi Arabia fail to agree on OPEC production cuts, we are seeing the bull potential for the precious metals sector to match the last bull period from 2005 to 2011.