Gold Breaks US$1,600 as COVID-19 Impacts Global Business

Precious Metals

The yellow metal broke past US$1,600 midway through Tuesday, even with the strong US dollar trending higher.

Gold broke past US$1,600 per ounce on Tuesday (February 18) after news that Apple (NASDAQ:AAPL) will fail to make its revenue targets as the coronavirus, now called COVID-19, continues to infect masses and claim lives.

The broader impact of the novel respiratory virus is taking its toll, with the tech giant being one of the first companies to report a quarterly revenue decrease as a result of the now-global epidemic.

Concern that more businesses will also report revenue reductions helped gold reach a two week high in pre-trading hours as safe haven assets became more alluring.

Citing a temporary constraint in iPhone supply and decreased demand in China, Apple noted that it does not expect to meet its revenue guidance for the March quarter. However, there is a silver lining in its report: “Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations.”

Subsequently, the gold price trended higher, reaching US$1,588.11 before markets opened.

“We’re seeing some renewed weakness in the stock markets following the announcement by Apple … it highlights that this (COVID-19) is not just an isolated event unfolding in China,” Saxo Bank analyst Ole Hansen told Kitco. “It’s having a global impact on supply chains and shipments, this will have a negative impact on growth expectations.”

As China, one of the largest consumers and producers of international goods, begins the slow recovery process, more companies are expected to report sales and revenue declines as a result of the prolonged Lunar New Year festivities brought on by the COVID-19 outbreak, which had infected more than 51,000 people and claimed 1,688 lives as of this writing.

The yellow metal, which rose to US$1,592.70 after markets opened, continued its rally, breaking the US$1,600 threshold at 11:07 a.m. EST, even with the strong US dollar trending higher.

“Dollar and gold are negatively correlated, but at this moment even though the dollar is moving higher, gold is moving higher and that means the demand for safety is outweighing the currency impact on gold,” CMC Markets analyst Margaret Yang Yan told Reuters.

Yan also noted that Asian-Pacific markets opened broadly lower on Tuesday as investors displayed more caution about the economic effects of the coronavirus on business sentiment and consumer demand.

Silver has also benefited from safe haven tailwinds. The white metal moved above the US$18 an ounce mark, a range unseen since the end of January, when the metal was supported by geopolitical unrest.

The silver/gold ratio — a barometer of how much silver it would take to purchase an ounce of gold — has also decreased to its lowest point since late January, standing at 88.3.

Shares of Apple were down 2.3 percent Tuesday, trading for US$317.25.

As of 11:24 a.m. EST, gold was selling for US$1,603.50.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

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