The New Year isn’t starting on a great note. The new wave and new variants of the Covid-19 has forced a lot of European countries to return to lockdown. London, which happens to be a major gold bullion vaulting center will face transporting challenges similar to what happened in March 2020. These challenges are what led to shortages of gold and silver bullion in the precious metals markets. However, this time around vaulting service providers might be better prepared having learnt a thing or two about possible market disruptions that are brought on by COVID and Brexit.
After February, the escalation of the virus hampered high risk assets like gold. Commodity and equity markets plunged. This was further escalated by the rise in safe-haven demand. During this period, the price of gold rose by 3% as concern over the world economy grew and central banks put additional monetary policies in place.
China, which was the origin of the outbreak and happens to also be one of the biggest gold buyers in the world, faces an uncertain economy. When things got bad, China took stringent measures to contain the outbreak including shutting down businesses and imposing travel bans. As industries paused and the public stayed home, key economic indicators like manufacturing, imports and exports plunged. The same thing happened throughout the globe as countries imposed their own containment measures. Gold jewellery sales plunged by an unprecedented 40% during the first few months of the year.
When news of the U.S becoming the epicenter for new COVID-19 with numbers surpassing the hardest China and Italy, panic set in. This mattered because the most countries rely on the U.S economy. If the American economy is bad, everything else seems bleak. It was a precarious time and gold buyers were reporting shortages of stock. Not only do people buy gold bullion as a safe-haven but those who have gold already are holding on to it hoping to cash in when the price shot through the roof. The price of gold broke through the $2,000 an ounce. The economy hasn’t shown signs of getting better especially now with the new variant creeping its way into Europe and the U.S. Stimulus packages can only go so far, with the vaccine being rolled out, things might return to some kind of normalcy soon. However, what they mean at the end of the day is more debt. Countries are getting into more debt, inflation will go up and there still won’t be enough gold to bail out fledgling economies.
Gold bullion shortages will continue into this New Year as refineries and mints still aren’t operating at 100% and some gold mines are facing closure. There has also been talk of reaching “peak gold”. This means it is becoming harder to extract gold from the earth. We could still deeper but there is a limit on how deep mines can go and safely send people down shafts to mine. This is why recycling old gold has become so important and why there is a proliferation of cash-for-gold dealers everywhere. Gold dealers who buy and sell still have to brace themselves for more delays as suppliers grapple with logistics red tape.