We've never experienced anything like this. There was the Great Depression and the Great Recession. Now, we have the Great Lockdown, which bans much of economic activity. Well, the shutdown of economy really shut downs the economy.
In this edition of the Market Overview, we assess the scale of the Great Lockdown, based on the newest economic reports. The IMF expects that the global economy will contract 3 percent this year, but we argue that the IMF's estimate might be too optimistic.
We also compare the current coronavirus crisis with the global financial crisis from a decade ago. We have good news for the gold bulls: the today's downturn is much deeper than the Great Recession. And it may turn out to be more inflationary later in the future, if the current trends in the bank credit and money supply continue.
We also examine the Fed's unconventional monetary policy implemented in the aftermath of the pandemic outbreak. Although the quantitative easing does not have to be inflationary and it was not in the aftermath of the Great Recession, this time is different. In the short run, we expect disinflation, but we think that the risk of inflation later in the future is higher than a decade ago.
Last but not least, we analyze how gold performed during the first quarter of 2020 and later in April. Although gold prices did not skyrocket, the yellow metal was one of the best performing assets during the pandemic, if not the best one. We do not merely examine the past - we also present the fundamental perspective for gold prices later this year! In particular, we address the question how far the gold price can go up, taking on some popular myths.
So, stay home and protect your health. But also protect your capital. We are here to help you in these challenging and risky times: read our Gold Market Overview and find out what the current crisis implies for the gold market!