The Coronavirus Uncertainty

There is nothing Wall Street dislikes more than uncertainty. And, if ever there were uncertainty, it is the question of just how severe the coronavirus pandemic may become. No one really knows whether COVID-19—which originated in China but has now spread to South Korea, Japan, Italy, Iran, among other countries—will severely impact the global economy or just be a brief economic blip.

Invest in the safe haven of gold.

This uncertainty is what sent investors running for the stock market exit and rushing to the security of gold in late February, after the same phenomena had occurred near the end of January when the spread of the virus gained worldwide attention.

“The markets are spooked right now,” Bob Haberkorn, senior market strategist at RJO Futures, told CNBC.

In the second major coronavirus-related selloff, the Dow Jones Industrial Average plunged more than 1,000 points on February 24, a drop of more than 3.5 percent, its biggest drop in two years. The decline took the index into negative territory for the year. The tech-heavy Nasdaq Composite Index sank 3.7 percent. Meanwhile, gold jumped 1.7 percent to a new seven-year high of $1672 an ounce. Gold has climbed more than $140 an ounce since the beginning of the year, an increase of 9 percent.

Adding to investor concerns is an indicator of a possible recession—an inversion of normal interest rates that has the 3-month Treasury bill offering a higher yield than the long-term 10-year note. Bond market inversions have often preceded recessions. 

Invest in the safe haven of gold.