The negative economic effects of the coronavirus epidemic are prompting people to seek safe haven assets like gold.
It’s official: the number of Wuhan coronavirus infections now exceeds that of the 2003 SARS epidemic.
Chinese government officials have established that there are currently 5,974 reported infections in mainland China. At the height of the SARS epidemic, there were 5,237 infections and a total of 800 deaths worldwide. Nonetheless, death rates from the Wuhan virus have so far been lower, with 132 deaths in China.
Wuhan, a city in central China, is the epicenter of this virulent acute respiratory infection. According to Chinese authorities, this new coronavirus, just the common flu, has the ability to adapt to spread during its incubation period.
Therefore, people who have no symptoms of severe flu can still transmit it. This characteristic of the virus differs from other viral diseases such as Ebola or SARS and makes containment of the Wuhan virus much more difficult.
British Airways suspended flights to and from China, making it the first international airline to do so. The British standard bearer makes a myriad of weekly trips to Shanghai and Beijing. Air Canada and United Airlines have announced that they will also reduce their flights to China.
Hong Kong also halved the number of trips to mainland China and closed its rail services to the country. The Pearl of the Orient Cathay Pacific also canceled all of its scheduled flights to Wuhan until March. As a result, China will experience a shortage of inbound international flights, with travelers canceling their scheduled trips to the East Asian country.
More than 200 Americans living in the city of Wuhan have also been evacuated and brought back to the United States. This number includes several businessmen and diplomats in China. The United States Centers for Disease Control screens all incoming passengers in an isolated location.
They will be confined to a terminal remote from public and commercial carriers until they receive the green light to continue the immigration process and return home. There are reports that countries like South Korea, France, Japan, Germany, Canada, Britain, Morocco, Kazakhstan, Myanmar, the Netherlands, Russia, and Australia also plan to evacuate their citizens.
The virus has also been reported in 15 other countries, including Singapore, Canada, France, Germany, Australia, Hong Kong and the United States. The United States has five confirmed cases, all from travelers from China.
There have, however, been no deaths reported outside of mainland China. However, the United States has warned its citizens to make non-essential trips to the country. As scientists in Australia, China and the United States burn midnight oil for a vaccine, the virus has wreaked havoc on the global economy.
The first cases of the virus were reported as China prepared for the Lunar New Year celebrations. The holidays bring about the most significant period of human migration on the planet as Asian families return home to celebrate together.
The 40-day festivities have a huge impact on the economic well-being of the country and that of its neighbors. Also known as the Spring Festival, the season brings increased demand for entertainment and vacation spots, food and drink.
Lunar New Year is the busiest season in the Chinese film industry. Long vacations also create an overwhelming demand for travel services, as people from the most populous nation in the world travel from the cities where they work to return to their rural homes.
This is the time when air and rail operators are making huge returns. The country’s National Railway Administration expected more than 440 million train travelers during the holiday season. The Chinese aviation authority was ready for 79 million passengers, and an 8.4% increase from air travel figures compared to 2019 for the season.
As fate would have it, there have been massive cancellations of travel plans, particularly in Wuhan. All public transport to and from the city of 11 million people has been canceled in an attempt to contain the spread of the virus.
Public social activity was also discouraged, forcing massive cancellations of film screenings. As a result, seven new films scheduled for release during the auspicious season have been withdrawn.
President Xi Jinping called the epidemic a “serious” virus and supported his health official’s determination to stem the spread of the virus. Wuhan is about to open a new 10,000-bed hospital to deal with the emergency. He added more days to the already long holiday season, which will have a huge impact on the country’s trade and production.
China is the world’s second largest economy and a major exporter of vehicles, clothing, iron and steel products, medical devices and organic chemicals. The closure of the country’s transport also weakens the exporting countries of East Asia which are already affected by the normal closure of the holiday industry.
Taiwan’s exports to China, for example, account for 29% of its export earnings, while South Korea receives 25% of its export earnings from China.
Foreign companies in China, such as Starbucks, KFC and McDonald’s, are also cutting back, with Starbucks temporarily closing half of its stores in China for fear of the virus.
Confirmation of a second infection in the United States slowed its stock market, lowering its most important indices after the announcement by the Centers for Disease Control and Prevention (CDC). American stocks are not as deeply affected by the virus epidemic as Asian stocks.
The stock market values of Chinese airlines such as China Southern, Air China and China Eastern all fell due to travel cancellations. Oil prices also fell, with the cost of Brent Crude falling to $ 60 per barrel.
Shelter assets such as the Japanese yen, US Treasuries and gold, on the other hand, benefited from increased demand. The price of US bonds, for example, rose, reducing their yields, while the yen strengthened by 0.49% to 108.73 yen per dollar. Gold rose 1.1% as investors unwilling to take risks turned away from the crude oil and equity markets.
The risk-averse environment is suitable for the gold market, although the virus epidemic may drive customers away from gold stores, which are very busy during the Lunar New Year holidays. China is the largest consumer of gold in the world, and the purchase of gold in the country resumes a few days before the Spring Festival.
This time, demand was sluggish due to high gold prices and the economic downturn, while the effects of the China-US trade war are still being felt. Demand for gold in China increases when rates are lower. Gold analysts, however, predicted higher demand than that of 2019, which was considered a slack year for gold in China.
Afshin Nabavi, commercial director of MKS (Suisse) SA, says:
“People may not want to go out during the holidays, which could certainly affect Chinese New Year gold sales. As a result, we may see a very moderate retail jewelry market, which may last for some time. “
Kitco Metals global trade director Peter Hug notes that demand for gold is also weak in Hong Kong, affected by declining tourism.
“We don’t see the same type of levy for the type of New Years commemorative coins, whether sovereign coins or collectibles made by private mints that we’ve seen in recent years.”
Despite the impediments the virus has brought to the crucial Chinese New Year market, gold prices have remained stable due to heightened geopolitical factors.
Spot gold rose 3%, confirming that a widespread viral epidemic could push physical gold prices much higher.
To learn more about Novem, visit: https://novemgold.com
Join the discussion in our Telegram channels and follow our progress on social networks: