It is becoming increasingly clear that the new coronavirus, which causes the disease Covid-19, is going to have a significant impact on the global economy.
The trouble creeps in with very large, complex and therefore fragile supply chains – companies that work with products assembled in a string of different countries on a tight time scale may discover that they are inadvertently reliant on a factory in China producing just one component in their product, and that factory temporarily halts production. You can see how the knock on effects would manifest both quickly and unpredictably.
I raise the issue of this latest global pandemic alert because it has already manifested in the jewellery world. Not only has HKTDC’s dual-show extravaganza in Hong Kong been delayed from its usual date in March this year to later on giving the most obvious real-world example of problems for most jewellers, but the wider fears for the economy have prompted investors to do what they always do. That is to get out of company stocks and into safe haven commodities. Gold has always been that commodity, and this time is no different: the price was at a seven-year high at the time of writing.
On the face of it, this is a big concern to the jewellery world, because the last time the gold price rose significantly was in the wake of the financial crash of 2008, and it never seemed to come down again, plunging jewellery manufacturers into a decade of either using less gold in their product or charging more for it.
But the difference here is the underlying cause: in this scenario, investors are acting in a jittery, spooked way – stocks, currencies and commodities are jumping around a bit as they try to work out just how bad the threat is to the global economy. It’s not because a string of banks have collapsed or a mass-mortgage-defaulting crisis has taken place revealing that large populations are poorer than everyone thought.
This time, it’s in direct correlation with what happens with this virus. If they can contain it, or just slow down enough to get factories back up and running, investors will loosen their grip on gold again.