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Prices of gold and bonds tumble amid fears of coronavirus-related recession

Prices of gold and bonds tumble amid fears of coronavirus-related recession

Posted March. 14, 2020 07:49,   

Updated March. 14, 2020 07:49


Fear of the spread of the coronavirus is affecting global financial markets, resulting in a selling trend even in risk-free assets such as gold and bonds. Investors appear to cash in their investment assets amid rising risks to the real and money economy.

A selling panic hit the commodity markets as well. Gold for April delivery on COMEX on Thursday (local time) fell 3.2% to settle at 1590.30 U.S. dollars an ounce. The price of gold in South Korea closed Friday at 62,275 won per gram, down by 2.29% from the previous day. West Texas Intermediate (WTI) futures for April delivery were also down 4.5% on the day.

Gold, a risk-free asset, usually moves in the opposite direction of stocks, one of the riskiest assets. The idea that there is no feasible solution to the global economic downturn prompted by the coronavirus outbreak appears to be the reason behind stock prices and gold prices moving together. “Something weird is happening on Wall Street, and not just the stock sell-off,” wrote The New York Times on Thursday. The CNBX reported that the financial market “went from uncertainty to panic.”

A spike in bond interest rate has resulted in a drop in South Korean stocks, bonds, and the won-dollar exchange rates. The interest rate of 3-year bonds rose 1.157%, according to the Seoul Money Brokerage Services on Friday. It went against the previous trend when the interest rate fell 0.998% on Monday.

Some corporate bonds have been traded at over 20%. The corporate bonds of Doosan Heavy Industries & Construction, which expire on Sept. 18, rose 18.29%, a relatively high rate given that other bonds of the same credit rating are traded at 3.45-3.5%.

Dong-Hyuk Kim hack@donga.com