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 As the economy faces one of its biggest threats since the 2008 global economic crisis, panic leads people to turn to gold as a lower-risk investment.

The economic effect of COVID-19 

The Wuhan-born virus took effect on Chinese production throughout the start of  2020, leading to huge hits on global businesses. Those dependent on Chinese factory exports were hit the hardest, with corporations such as Apple and Microsoft announcing the impact of the disease on their supply chains and production. When considering the sheer number of businesses dependent on Chinese exports, the effect of COVID-19 reaches across industries, from luxury goods to car manufacturing.

The airline industry is having to deal with the restrictions put in place by governments, preventing people from travelling in an attempt to halt the spread of the virus. This has led to entire fleets being grounded, and the possibility of airline companies needing to be bailed out by the government.

This and a multitude of other socio-political factors of the virus has all had a large impact on the stock market, affecting the global and local economies throughout the world. According to the Financial Times, the US has seen its worst week since 2008, and direct drops have been noted in Asia-Pacific equities and US stock futures. Markets affected include Dow Jones, FTSE 100, Topix in Japan, Australia’s S&P/ASX 200, South Korea’s Kospi and S&P 500 futures.

As a direct result of this economic instability, investors are turning to gold.

Surge in gold pricing

The price of gold has been noted by experts to have increased by 9% reaching its highest level since 2013. Gold has always been viewed as a safe investment for those looking for a stable form of investment insurance. With the instability of the current stock market, the demand for precious metals - particularly gold bars and coins - has seen a direct increase.

It has been predicted that in the context of this global panic, investment in gold will continue to rise, and thus so will its price. But investment experts are warning that despite its reputation as a stable asset, gold remains volatile, with its price resting solely on how much demand it has and the price people are willing to pay. With a high surge continuing to rise, people must be prepared for some falls to occur as a result; especially if people start to sell with the intention of making a profit.

Our advice

The surge in price and predictions of a continuous rise suggest that now is a good time to start investing in precious metals. One must remain cautious as with any investment to ensure that you fully comprehend the risks and seek advice where possible. However outside of the context of the coronavirus, experts still predicted a gold boom for 2020. Therefore despite the obvious effect of COVID-19, an increase in price and demand may still remain predicted for the rest of the year.