COVID-19 perfect storm for gold?

In today’s newsletter, we discuss how COVID 19 has impacted Gold Mines and disrupted entire chain

The Story  

Chains are only as strong as their weakest link—and COVID-19 shutdowns have affected every link in the gold supply chain, from producers to end-users.

According to a report from the World Gold Council “The COVID-19 pandemic disrupted the gold supply chain unlike any other event in modern history, with the impact affecting all elements of the chain from mining operations to final products”.

Let’s understand the process of gold:

Doré bars are typically produced at mine sites and transported to refiners and during refining process semi pure gold alloys are turned into pure gold and the last stage is transportation wherein gold is transported into financial hubs around the world through Commercial Flights, Cargo Planes and Chartered Airlines with most advanced security.

Any breakage at any point will lead to disruption of the entire cycle and COVID has impacted the entire chain starting from Mining to Transportation.

Here's how…

As per the World Gold Council, global gold production fell 3 percent Y-O-Y during Q1. In addition to processing problems, moving the physical currency metal also proved difficult due to COVID-19 restrictions. International travel bans and very limited cargo space in the flights created logistical chaos.

As the virus spread around the world, investors turned to safe-haven investments such as gold to hedge against economic risks. Which lead to an increase in investor demand for gold but there isn’t enough production and supply which lead to sharp rises in prices of the gold.

The COVID-19 pandemic has created the perfect storm for gold by disrupting the global supply chain while investor demand for gold exploded. Despite delivery risks and disruptions, the gold market has managed to continue operating thus far.

According to- Ross Norman, independent metals analyst ‘The problem here is not about a simple shortage of metal, it is all about the right sort, in the right location at the right time.’

Well, is there anything brewing up in the economy?

We don’t know, nor does anyone…

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