by Sean Kelly
Back on January 10th, the New York Times reported the first death from a new virus that surfaced in the Chinese city of Wuhan, the capital of China’s Hubei province and a major commercial center. Chinese officials linked the “bug” to workers that sold live fish, birds and animals at an outdoor market and stated there was no evidence that the virus could spread between humans.
Within 20 days, the World Health Organization declared the new coronavirus a public health emergency. A month later, the pneumonialike illness has been reported on every continent in the world except Antarctica and the global death toll has surpassed 3,000. COVID-19, according to the CDC, is a “respiratory illness that can spread from person to person,” and there is no vaccine or antiviral treatment available to combat it. The World Health Organization says the outbreak puts the world in “uncharted territory” as doctors have “never before seen a respiratory pathogen capable of community transmission.”
The rapid spread of COVID-19 has triggered mass quarantines, shuttered schools and universities, and closed major tourist attractions. It has disrupted global manufacturing and travel – and sapped consumer spending and business sentiment. It has pushed 10-year Treasury yields to record lows and the Cboe Volatility Index (VIX) to the highest level since the Great Recession. The resulting panic has triggered the Dow’s largest one-day point drop in history, pushed all three major U.S. indexes into correction, slammed global markets, and singlehandedly crimped economic growth forecasts around the world.
If that doesn’t get your attention – what will? How about this. Confirmed cases of the virus are now growing faster outside of China as Italy, Iran and South Korea have all reported more infections than the Chinese in the past week. New cases have also been confirmed in the United States where twenty-three infections were logged over the weekend. New cases of COVID-19 have been reported in New York, Florida, Rhode Island, New Hampshire, Illinois, and Oregon bringing the American tally to 88. Washington State has confirmed three more fatalities, putting the U.S. death toll at six. With the expansion of local and state testing, U.S. cases of the virus are expected to soar.
We are indeed in uncharted territory — medically and economically. And as major industrial nations now grapple with the full extent of the virus outbreak, critical questions are being asked. How will we contain the spread? How bad will it get? What will the social consequences be? How will business and industry cope?
Needless to say, all of this has increased recession talk and invoked endless comparatives with the financial crisis of 2008 and the dot.com crash of the late 1990’s. With good reason. Money is cheap again, loans are easy, consumers are overleveraged, markets are inflated, and we’re in yet another bubble. And just like that – the prospect of the coronavirus damaging the U.S. economy has become very real.
What about all those IRA’s, 401(k)’s, pensions and retirement plans? History has proven there is scant refuge from speculation, risk, and all out panic.
As local and state governments scramble for virus test kits – the federal government is scrambling for monetary tools to fight what is likely to be a contagion-fueled downturn. Like the testing protocols, the government’s response is delayed, the components are faulty, and the damage may already be done.
We’re facing a global supply shock that could send the price of basic goods sky-high, radically suppress demand, and dramatically reduce output – propelling the nation and the world into a deep recession. And we’re doing it with limited monetary tools and few resources to combat the massive financial disruptions to follow.
Much like the virus itself, we’ve never been here before and there is uncertainty around every corner. The world’s largest and wealthiest companies, the safe and profitable stalwarts of industry, are issuing warnings and exuding somber tones which underscore the truth about all pandemics – that nothing is safe and no one is immune.
Goldman Sachs, however, has identified one asset class that it deems virus resistant. Gold has earned its reputation as a safe haven precisely because of its history of holding its value during the most volatile episodes in human existence which include world war, global disasters, international catastrophes, and out of control pandemics. “While so much about the current environment remains unclear,” said Goldman’s head of global commodities, “there’s one thing that isn’t: gold, which—unlike people and our economies—is immune to the virus.”
Gold continues to dramatically outperform other safe havens in 2020 and has now officially become, “the currency of last resort.”