Gold does not offer good virus protection

Contrary to the financial crisis the price of gold has not risen after the corona crash. As investors expect the economy to suffer from exit restrictions only for a short period of time, stock markets will soon recover. That is what Richard Haimann of Ärzte Zeitung states

In the eyes of many German investors gold was the most valuable asset so far. This is shown by a study of the Berlin Steinbeis University. That is why the Germans bought powerful last year and now own gold bars and coins with a total weight of more than 8,900 tons and a value of more than 450 billion euros – about two and a half times as much as the Bundesbank. But during the stock market crash in the Corona crisis, hopes for the precious metal were not fulfilled.

The price of gouden munten did not go through the roof, nor did the share prices of gold mine operators skyrocket. On the contrary: from 9 to 19 March the precious metal (Aurum in Latin) lost 13.6 percent in value, while the German stock index Dax fell 18.9 percent in these ten days.

The gold price could catch up a bit, but could not make up for the loss. “In March the volatility of gold was at its highest level since 2011,” says Simona Stoytchkova, Managing Director of the brokerage company IG Europe in Frankfurt am Main.

Gold pays no interest

Smaller U.S. mining companies such as Coeur Mining even saw their share prices fall by more than 30 percent in March, while Barrick Gold, the world’s largest producer of around 200 tons, fell by 3 percent.

For Uwe Zimmer, director of the fund manager Fundamental Capital in Hennef, this is not surprising: “Gold is not protection against crises. Neither gold coins nor bars could be used to “buy rolls or toilet paper”. “The precious metal offers no interest, but it costs money for storage in lockers or safes.

Gold, on the other hand, had provided the protective function hoped for by investors during the 2009 financial crisis. While share prices collapsed by more than 50 per cent at the time, the Aurum price peaked at around 80 per cent. In subsequent years, however, it fell again by more than 43 per cent.

However, the financial crisis and the current corona crisis are not comparable. “The 2009 stock market crash was the result of excessive bank lending on the real estate markets in the US, UK, Ireland and Spain,” says Günter Vornholz, Professor of Real Estate Economics at EBZ Business School in Bochum. As a result, banks were ultimately no longer able to support the real economy with loans.

Central banks intervened at the time

Only massive intervention by central banks around the world could stabilise the financial system again. Until then, many investors were looking for protection in gold,’ says the economist.

This time it’s different: “The corona crash is caused by temporary exit restrictions to prevent a pandemic that temporarily paralyzes the economy,” Vornholz says.

However, to protect workers and businesses, all affected states and central banks in Europe, North America and Asia have already launched stimulus packages and support programs. This meant that stock markets did not slide as sharply this time as they did during the financial crisis – and investors did not flee into gold from:

Vornholz: “The stability of the financial system was not questioned this time. What investment expert Zimmer confirms: “People see that the offer works and can buy with euros.

Fairs are always restored

As a result, prices have already risen sharply when Austria announced before Easter that it would gradually lift exit restrictions so that the economy could develop again. Both the Dax and the leading European index EuroStoxx 50 achieved more than five percent that day.

Richert: “With similar pandemics in the past, stock markets always recovered as soon as the number of infections and news about them peaked.