Will Gold Rate be Affected due to COVID-19?
The entire world is battling the novel coronavirus that has affected approximately 4.4 million people across the world taking the lives of 0.3 million people. Due to the rapid spread of the virus, there has been a surge in the total number of cases.
Most of the countries have declared a state of lockdown to prevent the spread of the novel coronavirus in their jurisdictions. The lockdown has put a temporary halt at almost all of the economic activities affecting economies and common people.
The primary result of the lockdown on the economic system of countries is that there is a sudden pause in the flow of capital that has disrupted the demand and supply of commodities across the globe. Similar to any other scenario of economic crisis, people have started stocking gold in its physical form based on the current gold in the UAE. The market trend has led to a sudden rise in the gold rate in UAE affecting its price across the world.
But why do people, tend to stock gold?
Well, there are numerous reasons why people tend to stock gold during phases of economic crisis or inflation. Let us take a quick look at these reasons.
Gold: Hedge against Economic Crisis
Gold is one of those commodities that has managed to maintain its value since times immemorial. Back in time, the Egyptians, Greeks, and the Romans used it as offerings to their Gods and made ornaments out of it. Later, gold became a part of their currency systems as it was used to make coins.
In modern times, gold has surpassed all barriers and managed to maintain its value. It is still one of the most precious selling metals of all time on earth. Nowadays, gold based on the current gold rate in the UAE is used as a popular tool to provide a hedge against inflation.
Gold’s ability to combat phases of economic instability is due to its high liquidity in comparison to other commodities and investment tools. Liquidity refers to the ease with which a particular commodity can be exchanged against cash. Gold is highly liquid in nature which means it can be easily exchanged against cash which is one of the reasons why people tend to stock gold during phases of financial/economic instability.
Gold as a commodity or financial tool has an inverse relationship with various other investment tools. This means when there is an ongoing economic crisis and various investment schemes/tools start underperforming this is when gold prices shoot. People start accumulating gold as a liquid commodity based on the current gold rate in UAE which leads to an increase in the prices of gold.
Impact of Novel Coronavirus on the Gold rate in UAE
The gold rate in UAE has increased gradually by the time the novel coronavirus has strengthened its grip. The rise in the gold rate in UAE is quite rapid in regions and zones that are worst affected by the coronavirus. Furthermore, while most of the hard-hit countries are experiencing a second wave of cases there is a risk factor that has worried investors across the globe fleeing them to other complex assets and tools.
Line-up of businesses and people in less affected areas across the UAE and globally are enjoying less restricted movement. The novel coronavirus has not only affected the gold rate in UAE for physical forms but also for the non-physical form of gold. The non-physical form of gold includes different schemes and programs that allow investors to invest in gold without worrying about security issues with stocking gold in its physical form.
Most of the spot gold markets remained shut across the country due to the nationwide lockdown. However, an important point to be kept in consideration here is that experts have observed stability in the prices. On the other hand, since the United States is one of the worst affected countries by the novel coronavirus the prices of US dollars have fallen, which might lead to an increase in the gold rate in UAE as well as other countries.
The COVID-19 outbreak has compelled governments and administrations across the globe to take strong measures so as to reduce the spread of the deadly pathogen. Europe has recently come out of two months of strenuous lockdown during which almost all economic activities were seized.
With Europe coming out of the state of lockdown resuming its economic activities gradually, there is a prediction that the gold rate in the UAE and across the world will get back to normal soon. Apart from gold other precious metals like palladium, platinum, silver have also skyrocketed in terms of prices. The global price of palladium rose by approximately 1.1 percent followed by the price of platinum that rose by 1.3%.
In a Nutshell
Gold is considered as a safety tool that protects economies and individuals during financial or political uncertainties. Considering the current situation that has affected almost every country on the planet, the gold rate in UAE and the world will rise till the time the pandemic does not subside.
Most of the central banks of different countries and individuals have already started to accumulate gold as early as possible so as to protect themselves from the worst scenarios. The current gold rate in UAE is a result of the economic, and political situation which will settle only after this deadly virus is wiped off the planet.