Due to the global coronavirus crisis seemingly letting up, countries are slowly transitioning to a more normal state of affairs. However, this short-term excitement may not affect the gold market in a negative manner for too long.
Coronavirus Measures can be Lifted Somewhat
Most European countries have noted a steep decline in the number of novel coronavirus infections. Although that is positive news warranting excitement, it remains to be seen if this is merely a “fluke” or a real trend. Virologists all over the world want to see numbers decline for two consecutive weeks before discussing the current restrictions in place.
Most governments aren’t thinking along the same lines, however. There appears to be a general consensus of how restrictions can be eased without facing major repercussions.
By easing the measures in place today, achieving this two-week consecutive decline in cases and deaths will not materialize magically. It takes continuous efforts to make this happen, yet it would appear that a few days of promising numbers make some people forget the crisis we are in today.
Quantitative Easing Continues
In the Western world, governments explore options to ease upon current coronavirus restrictions. That is easier said than done, as there are ample unknown factors that need to be taken into account at all times.
On the other side of the globe, however, things look very different. The Bank of Japan is introducing additional stimulus packages to soften the blow of the economic impact that will follow after the coronavirus crisis has been overcome. The BoJ even plans to buy “unlimited amounts of government bonds”, which isn’t necessarily a plausible course of action.
This new stimulus will be necessary, based on the current situation. It is for this reason that other countries will – most likely – have to follow a similar path. While the easing of restrictions will help the domestic economies, the real impact of the coronavirus crisis won’t be felt for another few months.
Stimulus packages often tend to trigger short-term stock market rallies. The news by the Bank of Japan did exactly that, albeit the momentum looks rather weak overall.
Little Impact on Gold Markets
When countries announce easing restrictions, and other central banks introduce more stimulus, there will be upward momentum for most markets. In terms of gold and silver, it often triggers a minor decline in value, although the impact doesn’t seem to be all that severe as of right now.
One thing is certain: lifting the lockdown will trigger a cascade of economic repercussions. Many experts believe there will be an economic collapse that might be more problematic than the entire 2008 financial crisis. Countering that bleak outlook with more stimulus packages will eventually drive investors back to safe haven assets, including precious metals and Bitcoin.
Gold often benefits from widespread stimulus packages. As more of those efforts by central banks are likely to occur throughout 2020, the gold price will likely gain more momentum moving forward. Controlling economic damage caused by the coronavirus will be a tough balancing act for the financial powers globally.