Unfortunately the black swan has arrived, a new global recession has started
In this article written by our analysts on December 30, 2019, the outbreak of a serious financial crisis similar to that of 2008 by May 2020 was predicted.
The black swan eventually has arrived and in an absolutely unexpected way. A global pandemic such as the Covid-19 pandemic caused the Asian financial markets to go haywire first and then gradually the European and American ones, so much so that on Wall Street today (12 March 2020), for the second time this week, automatic blocking (limit down) of futures on the indexes due to excess bearish has temporarily been triggered. Piazza Affari, on the other hand, lost more than 68 billion euros in today’s day alone.
The situation is really critical not only for the financial markets, but even more so for all the companies and commercial establishments of the involved countries. In fact, following the restrictive measures issued by the various governments of the world in recent days, almost all entrepreneurs will they immediately found themselves in a situation of economic disgrace, forced to no longer be able to work, foreshadowing the worst also and above all to their countless employees, almost all with dependent families. Not even realizing it we entered a phase of very strong global recession.
The disastrous macroeconomic effects of the pandemic
First of all, it is necessary to look at the huge costs that almost all the States involved will have to bear to stem the health emergency and to take care of sick people. Italy has already stated that it will allocate over 25 billion euros to combat the pandemic and the disastrous effects it causes. In the US, instead, Donald Trump has already allocated 8.3 billion dollars.
Obviously these huge investments – albeit very useful – create additional debt that sooner or later will have to be paid off with the increase in taxes and with the use of restrictive laws for economies.
However, unfortunately, there will be other probably more serious effects, among which are:
- huge drop in GDP by all countries involved in the pandemic due to the reduction in supply and demand caused by the need to take care of one’s health and that of loved ones
- temporary closings of companies, schools and other public and private bodies to safeguard the areas most affected and avoid relapses
- definitive closings of companies and businesses cut short by the crisis that has arisen, with the consequent dismissal of employees
- very strong drop in tourist presences and bookings of goods and services in the places most affected by the shock caused by the pandemic
- huge drop in domestic and foreign investment
A new gold rush has started
“After the Gold Rush” is a beautiful song by Neil Young. And it bears a message for all investors or savers; you don’t come after the gold rush. Nothing to do with the fever that broke out across the West after the second half of the 1800s. What is staged today is a gold rush that can be done in complete tranquility; just a phone and a computer. To be sure, the new gold rush has already started for at least a year. The prices of the precious yellow metal have already been on the rise for several months. It’s bad to say, but gold thrives in times of great crisis and tensions. “Money never sleeps” has always been said. Instead, almost all investors unfortunately often sleep. For the minority of investors who are awake and ready to take advantage of the opportunities to protect their savings or increase them or secure their assets (more than commendable and sacrosanct intention given the many, too many dangers that are gathering on savings and on private assets above all by virtue of this new global recession) there is not a minute to lose or all of “After The Gold Rush” will come. Right now the gold rush is called a coronavirus crisis. Among the many effects that coronavirus is triggering on the international economic system there is also a newfound gold course. It is true that in times when the crisis bites the most, gold is always the safest and most valued safe haven asset. But in the face of the health emergency we are experiencing, in Italy even more massively than in the rest of the world, gold flies even more. Just think that in these first days of March the ‘financial’ gold rose from a price of 1590 to 1701 on March 8. Not only that, on 9 March 2020, the world gold trade supervisory body, the London Bullion Market Association (LBMA), declared that on that day, only within 24 hours, gold bars were exchanged physical gold and financial instruments with the yellow metal as an underlying for over 100 billion dollars. Positive forecasts for the future are linked to the coronavirus crisis, but not only. There are growing geopolitical tensions also of another type, but it is certain that the coronavirus, in addition to undermining many national economies, will also exacerbate the tensions on the international chessboard, without forgetting that Russia and China are also countries that in recent years have done nothing but increase their physical gold deposits. There are many analysts who predict that during this year the price of financial gold will reach 2000 with a consequent increase in the price of physical gold as well. That “After The Gold Rush” doesn’t come.