Goldman Sach’s Currie answers why coronavirus fears haven’t push gold higher
(Kitco News) - The gold market is seeing some renewed momentum on growing fears that the spreading coronavirus will impact the global economy, but some analysts have noted that the price action has been muted as prices remain confined in a relatively narrow trading range.
In a recent interview with Bloomberg TV, Jeffrey Currie, global head of commodities research at Goldman Sachs, said that it makes sense that the gold market isn’t seeing a more dramatic reaction to threats of a slowing economy because a critical component of the marketplace is missing.
He noted that China consumers the most physical gold in the world, but market has dried up as cities remain locked down in an attempt to combat the spreading virus.
“If [Chinese consumers] are not going out and buying, you will get the weakness,” he said in the interview. “You just don’t have the bid coming from the physical side.”
According to the latest reports, nearly 1,400 people have died from the virus. There are about 65,000 reported infections globally with the majority coming from China.
Currie’s comments reflect the sentiment in China as the China Gold Association said earlier in the week that consumers “are not in the mood to shop for jewelry.”
Some analysts expect that gold demand in China could fall 10% because of virus fears.
Despite gold’s muted performance in the face of the coronavirus Currie said that there is more upside to gold. Last month the investment bank said that it sees gold hitting $1,600 in its six-month and 12-month outlook. The comments come as gold prices end the week on a strong note. April gold futures last traded at $1,586.10 an ounce, up 0.46% on the day.
Currie said that geopolitical uncertainty will continue to support gold; however, the big driver he said he is currently watching is further central bank demand.
“You have central banks around the world diversifying away from dollars,” he said.
Data from the World Gold Council show that 15 central banks bought a total of 650.30 tons of gold last year, down 1% from the 50-year record set in 2018.