Gold: Corona's Standalone Victor?

The COVID-19 pandemic has put the world's economy through strenuous and increasingly devastating conditions for the past month. The world commodity market is slowly collapsing in the face of the pandemic, and Indonesia is no exception to the predicament. However, Indonesia's gold prices have remained unwavering amidst this crisis and still demonstrate positive growth. Vice Minister of Finance, Suahasil Nazara states that despite falling prices for other commodities such as crude oil, gold prices are increasing due to high demand and triumphs as a "safe haven" during this volatile situation (5/20). He further explains that currently, according to the commodity price index, gold values at 110 while all the other commodities have plummeted to below 100. On Wednesday (5/20), gold prices in the international market exhibited a 0.18% increase to approximately US$1,746.99/troy ounce -- a record high since November 2012 while at the same time, Indonesian gold producers, PT Aneka Tambang Tbk (Antam) also reported a 0.23% price growth from Rp866,120/gram to Rp868,120/gram. Furthermore, throughout the week of 11-15th May, gold prices have shown a promisingly consistent rise in both the Indonesian and international markets.

Amid the whole COVID-19 situation, the price of gold remains uncertain mainly due to fears of a global recession. On Wednesday (5/20), the cost of gold in Indonesia remains unclear as the price of gold produced by PT Aneka Tambang TBK (Antam) rose while previously on Tuesday (5/19), the price of Antam gold fell by 1,14% from IDR 876.120/gram. Globally, the cost of gold fell on Monday (5/18) because there is news around the making of COVID-19 vaccine making safe assets (safe haven), for instance, gold looks uninteresting to the public. Nonetheless, on Tuesday the price of gold remains high since some people are still skeptical toward the success of the COVID-19 vaccine test by Moderna.

Alternatively, there are substitutes of stable returns and potential riches available. Firstly, the yield on the new 10-year Treasury Bill increased by 4 basis points to 0.681% and the yield on the 30-year Treasury bond increased by 7 basis points to 1.382%. Inversely, Yields shift to costs. Biotech firm Moderna’s shares rose for more than 17% thereafter their announcement on the vaccine that produced COVID-19 antibodies in all of their 45 participants on Monday. Several investors are also betting on a silver rally after the gap between gold and industrial metal has risen to its widest point in more than three centuries. Contrary to gold, volatile markets inclusive of aerospace and hotel or accommodation businesses have peaked their lowest low during the coronavirus outbreak. However, with markets beginning to pick up again and the S&P 500 recovering to have its best week since 1974, there could be hope at the end of the tunnel for these ravaged sectors. Additionally, the Federal Reserve revealed that it would pump an estimated $2.3 trillion into lending facilities to support distressed businesses. Although much of this funding is diverted to smaller businesses, economic growth seems to be ongoing as the coronavirus outbreak curve flattens.

Source:

CNBC Indonesia

Reuters

Financial Times

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