Oxford presents four hypothetical scenarios

WGC Investment Update of May, Covid-19: potential impact on the global economy and gold performance says the Covid-19 pandemic and ensuing economic lockdowns have slashed global growth forecasts for 2020. With varied expectations around the speed of the economic recovery, we analyse the potential performance of gold across four hypothetical scenarios provided by Oxford Economics:

 

1. Swift recovery, 2. US corporate crisis, 3. Emerging markets downturn & 4. Deep recession. Our analysis shows that higher risk and uncertainty combined with lower opportunity cost will likely be supportive of gold investment demand in 2020. This could offset the negative effect of lower consumer demand on gold performance as economic activity contracts.

 

Gold’s behaviour thereafter may depend on the speed of the recovery and the duration of monetary policy and fiscal stimuli.

 

WGC Investment Update of May said in concluding, our analysis indicates that, across the hypothetical scenarios under consideration, higher risk and uncertainty combined with lower opportunity cost will likely be supportive of gold investment demand in 2020. This could offset the negative effect of lower consumer demand on gold performance as economic activity contracts.

 

Gold’s behaviour thereafter may depend on the speed of the recovery and for how long fiscal and monetary policy stimuli remain in place.

 

•