On Thursday, February 20, world gold prices show record growth. The cost of precious metals increased by 0.5% and for the first time since January 2013 exceeded $ 1,620 per troy ounce. This is evidenced by data from the Comex New York Mercantile Exchange.
Since the beginning of 2020, gold in the world market has risen in price by almost 7%. The cost of precious metals began to rise sharply back in January amid a worsening of relations between the US and Iran. As a result, gold quotes briefly exceeded the psychological level of $ 1,600, after which they slightly decreased.
Meanwhile, in February, prices resumed growth. As explained by RT financial analyst at BCS Premier Sergey Deineka, the main reason for this dynamics was the spread of coronavirus in China. According to the expert, traditionally, during the growth of uncertainty in the global economy, investors begin to buy gold more actively as a reliable means to save money.
“Gold quotes started to rise amid growing fears about the impact of the outbreak of coronavirus on the Chinese economy and the growth rate of global GDP as a whole. At the moment, the prospects for recovering the Chinese economy from a viral shock are still uncertain. In this regard, investors are increasing purchases of precious metal, ”said Sergey Deineka.
Recall that at the end of December 2019, the authorities of Chinese Wuhan reported an outbreak of a respiratory infection of unknown origin. According to local experts, the cause of the disease was a new type of coronavirus COVID-19. To date, the number of people infected in China has exceeded 74.5 thousand, and 2130 people have died.
According to experts, investors in China are alarmed by the information about the closure of production enterprises, the closure of borders between cities of the country and the evacuation by various states of their citizens from China. The current state of affairs in the long term may turn into a recession in business activity and a sharp slowdown in the economy of the Asian republic.
According to the International Monetary Fund (IMF), in 2020, China's GDP growth rate will decline from 6.1% to 5.8%. At the same time, experts of the S&P Global Ratings rating agency predict that the economy of the Asian republic will grow by only 5%. The value is expected to be the weakest in the last 30 years.
“As China’s economy slows down, demand for resources, including energy, will begin to fall in the country. All this will inevitably slow down the global economy, ”said Finam analyst Alexei Korenev in a conversation with RT.
According to him, along with the threat of a slowdown in the global economy, investors highly appreciate the likelihood of a collapse in the global stock market in the coming months. Such a situation may provoke an even greater appreciation of gold until the end of 2020.
“If the correction in the stock markets does begin, and most experts expect this already in the first half of 2020, then the depth and pace of the fall of stock quotes will also affect the dynamics of gold prices. If the depreciation of securities turns out to be significant, the price of gold can jump to $ 1,700 per troy ounce, ”Korenev explained.
Meanwhile, while uncertainties in the global economy persist, over the next two years, quotes can update the historical maximum and rise above $ 2,000 per troy ounce. This point of view in a conversation with RT was expressed by EXANTE managing partner Alexei Kiriyenko.
“It is likely that in 2020 prices will reach the level of $ 1700-1800, and in 2021 they may exceed $ 2000. The main reason for such dynamics may be the reaction of world authorities to the slowdown in the global economy caused by coronavirus. Thus, the policy of central banks to stimulate economic growth can spur inflation in the world. As a result, investors who want to insure their money against impairment will be more active in buying gold, ”Kiriyenko noted.
According to the analyst, the expected increase in gold prices could positively affect international reserves in Russia. According to the Central Bank, the country's gold and foreign exchange reserves have already reached their maximum level over the past 12 years and currently exceed $ 562 billion. At the same time, the share of precious metals in reserves continues to increase and over the past year has grown from 18.7% to 20.6% ($ 116 billion )
“In general, today an impressive share of gold has accumulated in Russian gold reserves. Therefore, a further increase in metal prices may favorably affect the assessment of the overall level of the country's gold and foreign exchange reserves, ”Kiriyenko added.