On 31 December 2019, an uncertain virus starts spreading in Wuhan, China. After reporting multiple cases new virus was detected which affects the respiratory system in the human body and called Corona. This virus spreads so quickly all over the world and multiple people died because of no vaccination.
Coronavirus Effect on Gold and Dollar Prices:
With the outbreak of coronavirus, the global market also affects badly. The increase in the cases of coronavirus in many countries results in shutting down of different business sectors which may affect the entire economy and once again the fear of a market crash (just like the great recession in 2008) surrounds the investors.
Read Also: Coronavirus: Impact on global economy
Gold vs Dollar:
Gold is a precious metal and an old means of exchange. With its intrinsic value, you can trace the importance of gold from history. The price of gold is relatively sensitive to the overall value of the US dollar. What determined the value of the US dollar? it’s a demand and supply concept. When the demand for dollar increases in the market its value increases and when its supply increases it’s value decreases. Because of the level of demand and supply, the value of a currency fluctuates.
The Relationship between Gold and Dollar:
The relationship between gold and dollar is also similar. When the gold increases in value the dollar value falls as compared to other currencies. Understand it with the following example, when the price of a certain object or commodity increases. few people buy it in the result demand decreases. Similarly, when the gold value goes up dollar value decreases as gold becomes cheaper in other currencies. The same thing is happening now with the prices of oil as well, it starts decreasing after COVID-19.
There is also a psychological factor connected with the gold and that is when any uncertain event happened which spread fear among society just like coronavirus the price of gold increases.
At the start of Feb 2020, the price of gold was increasing with the rate of 0.3% as coronavirus was spreading all over the world but recently a slight decline in the value of gold was seen but in the future, the value of gold is more likely to go up. See the graph below
Is the gold price decrease again or it continues to go up? Will coronavirus effect gold and dollar prices more or it is going towards its end. What comes next, only Allah Almighty Knows.
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