Covid-19 is haunted by the markets

Weekly market report

The corona virus, now officially called Covid-19, is driving the markets more and more worried because of the inevitable consequences for the global economy. There are always days with countermovements and recoveries, especially on the stock markets. Nevertheless, the largest leading indices in the world (bizarre, but true: with the exception of the stock exchanges in Shanghai) are now quite clearly in the red for 2020.

 

Fed rate cut cuts uncertainty

Conversely, top-rated government bond prices have risen sharply over the week, reflecting the search for safe havens. The yield / market interest rate on ten-year US government bonds fell from 1.92 percent at the beginning of the year to almost unbelievable record lows at 0.81 percent. The yield on ten-year bunds is also not far from the all-time lows. The highlight of the week was the unscheduled meeting of the US Federal Reserve, at which key interest rates were cut by as much as 50 basis points. If this step to calm the market was intended, the shot backfired on Tuesday. The markets interpreted the measure as a panicked move, which further increased concern. Among other things, interest rates were cut in Australia and Canada.

 

Gold is gaining momentum again

So it was only natural that gold – just like government bonds and the yen – was also in demand as a safe haven. After a very weak last Friday, the gold price could make the biggest weekly gain since 2016. In a direct weekly comparison, it is implemented around 2.5 percent higher this morning than when I wrote my lines last week. However, last Friday there was a significant drop in prices. With some market participants apparently having to sell gold positions to fund losses in other markets, the price of gold plummeted from $ 1,630 / ounce to $ 1,563 / ounce. At the end of the week, gold was trading at around $ 1,585 / ounce. On Monday it was above the $ 1,600 / ounce mark again. It then fired up the turbo after the surprising Fed rate cut and jumped to $ 1,640 / ounce Tuesday afternoon, further up to $ 1,680 / ounce tonight. It is currently around $ 1,673 / ounce.