Covid-19’s impact on Singapore’s Physical Retail Gold Market

Financial markets have reacted with rising volatility as investment capital continues to seek out safe haven assets for refuge while waiting for clarity on full impact from the virus to play out. Governments around the world are still grappling with this crisis and are ready to introduce additional financial measures to stave off recession fears and buffer their economies. The emergency 50 basis point rate cut on March 3, 2020 by the US Federal Reserve was dramatic. It was a magnitude not seen since the Lehman Brothers collapse in 2008, and it revealed the gravity of the situation. However, pundits were quick to note that this was a health crisis and not a financial one. Rate cuts may have limited effects as cities remain in lockdown and factories remain shut. Critics have remarked that finding a vaccination cure might be more useful than a rate cut in these times.

In precious metals, gold has been the clear winner since the start of 2020. As of March 10, 2020 year-to-date, gold is up 8.7%, silver down 5.6% and platinum down 9.49%. The rise in prices has invariably caught the attention of physical gold investors in Singapore, with many donning face masks and making their way into dealerships to sell off their gold holdings at high prices. Volatile gold prices have also caught the attention of online investors looking for opportunities in gold trading to capture directional moves via trading platforms for physical deliverable gold.

In Singapore, lessons learned from SARS were put to the test as government agencies rolled out health advisories and business continuity guides to industry bodies and players to guide them on best practices. Having personal social responsibility, especially in times like these, can go a long way to stop the spread of the virus. In our office and retail store, we have implemented temperature taking and contact detail recording, and have face masks available for symptomatic clients to use. Hand sanitizers are now a permanent fixture in our retail store. Notwithstanding the challenges of Covid-19 prevention, providing liquidity for physical gold is still key for a properly functioning physical retail gold market in Singapore.

Initially, many observers were noting a casual correlation between the uptick in gold and the Covid-19 outbreak. However, the real drivers behind this rally could lie behind the combination of the full effects from interest rate cuts filtering in, disruption of global supply chain potentially leading to unseen inflationary risks, constant zero to negative yield environment and the peak gold scenario commented by analysts over the years. All of this may add up to a resurgent positive tone for the original safe haven precious metal: gold.

The revisit to 2012 price highs of US$1,702.50/oz. on March 9, 2020 has investors wondering if this is the gold bull market that everyone has been talking about and waiting for. Stay tuned to see how the markets will unfold.