Gold and Silver Prices are Likely to Rise on Global Coronavirus Fears

Gold and silver prices are likely to rise on growing coronavirus fears, and here’s why. This is Part 2 to my first article, “Will Coronavirus Be the Black Swan that Pops the Bubble of Everything in 2020?” In Part 1, I discussed why the severity of the Wuhan coronavirus is likely to be somewhere in between those that are dismissing the hysteria and those that dismiss it altogether as mainstream media hype (to view a short clip I filmed recently of most everyone wearing masks in a mall, as I’m based in Asia, click here.) The Wuhan coronavirus strain is most definitely not just media hype, and while very serious, it is also not likely to be as serious as the implied hysterics of some mainstream media reporting. As with most mainstream reporting, the truth likely lies in between the two extremes. Furthermore, the timeframe for the development of a proper vaccination has been reported with wildly inconsistent time frames, from just three months out to possibly as long as a year.

Again, I would imagine that the proper time frame is somewhere toward the latter of these estimates. Based upon my rudimentary understanding of drug development, the need for clinical trials to be conducted to test the efficacy of a developed vaccine would make it unlikely for a drug to be ready to go to market in a few months’ time. In the meantime, I would not be surprised to see the Wuhan coronavirus dominate media headlines and to see gold and silver prices rise strongly under the cover of massive media attention provided to a distraction that likely is most serious in the part of the world where I am based, and likely not to evolve into an epidemic that is nearly as serious in the Western hemisphere of the world.

In another display of how much the world has been dumbed down through the consistent use of doublespeak since the 1950s, apparently enough people believe that the coronavirus is a virus contracted from drinking Corona beer, that Google executives have reported searches for “beer virus” and “Corona beer virus” as trending in recent days. In the meantime, until more conclusive information is available about the mortality rate among those infected with the coronavirus, any company/events that are reliant on mass gatherings, such as airlines, Asian sporting events like the 2020 summer Olympics in Tokyo, One Championship MMA events, and Muay Thai boxing events are likely to suffer huge drop offs in revenue and attendance if the virus continues to spread at its current rate. Asian based airlines, with the majority of its flights into and out of Asian countries, like ANA, EVA, Hainan, Thai Airways, Malaysia, Singapore, and Cathay Pacific, are all likely to suffer a significant drop in revenues for the first half of 2020. Likewise, as business slows on the Asian continent, the largest banks in Asia are also likely to suffer from significantly declining revenues, not only from declining investments from declining Asian stock markets, but also from a lack of lending as well as business slows.

However, as I stated above already, one of the largest winners of the Wuhan coronavirus is likely to be gold and silver. As we already know, the Central Banker response to every significant drop in economic growth is to always slash interest rates. Given that it is near certain that the Wuhan coronavirus is likely to put a significant dent into Chinese GDP growth rates, we can count on Central Bankers to slash interest rates this year.

In the US, whenever we hear about US Central Banker interest rate decisions, as in the case of the one that remained unchanged yesterday, the referenced interest rate is the Fed Funds interest rate, which is interest rate for interbank lending of reserve balances on an overnight basis. Yesterday, US Central Bankers maintained the Fed Funds interest rate at an extremely low range of 1.50% to 1.75%. Below we can see a comparison of the base interest rates of various nations.

a comparison of central bankers' base interest rates around the world

As we can see, the PBOC’s base interest rate is much higher than every base interest rate set by Western Central Bankers. If the PBOC aggressively slashes their base interest rate in response to the Wuhan coronavirus, we should expect the US Feds to expedite their timeline for dropping the Fed Funds interest rate back to near zero. Consequently, under this scenario, I expect gold and silver to experience a continuing rise in prices for the first half of 2020.

gold prices poised to move higher, February 2020
silver prices poised to move higher, February 2020

For a discussion of investment opportunities to start 2020, including this patron only article here, based upon the effect of the coronavirus on global asset prices, consider joining our growing patron community here.

J. Kim

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