What impact will coronavirus, aka Covid19, have on the world of jewelry and gold? Try to answer Juan Carlos Artigas, director for Research and Investments of the World Gold Council, association of the main gold mining and trading companies. In essence, the expert traces two scenarios: the most positive one, with an emergency destined to resolve itself in a short time, a few weeks. And a worse scenario, with a coronavirus that breaks down like a scourge even in the western world: this could lead to lower sales of jewelry but, at the same time, to a higher price of gold.
At the heart of gold consumption, however, it is inevitable to put the epicenter of the epidemic, China. With a premise: according to Artigas, it is wrong to make a comparison with SARS, another epidemic that hit China between 2002 and 2003. In that case, in fact, the impact on health conditions (number of infected and dead) is was clearly minor.
As for China, for example, it can already be said that the Chinese demand for jewelry has been significantly lower than last year. Also because the Chinese buy jewelry especially in the first and fourth quarter of the year. The decrease in sales is currently around 10-15%. Then there is the reflection on the price of gold, which traditionally goes up when crises of various kinds face the world. Today China, explains the World Gold Council, is the largest gold market, contributing 30% of consumer demand in 2019.
Some of the effects of the coronavirus are already visible from the increase in trading volumes on the Shanghai Gold Exchange, the Chinese gold exchange, which has seen investor purchases. But eventually the potential deceleration in consumer demand could have a more noticeable effect on price than in 2003.
In summary, due to the coronavirus the demand for gold in the first quarter can drop by at least 10-15%. Whether demand resumes or continues to subside will depend on the duration of the epidemic and its impact on economic growth.
The two scenarios
1 If the situation is resolved relatively quickly and the global impact is contained, the result could be limited to a weaker Chinese demand for gold and a transitory impact on the price.
2 If, however, the epidemic spreads further and continues to influence investor sentiment, global flight flows towards quality, amid concerns of a global slowdown, could have a more sustained (positive) impact on the gold price.