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Fear runs ahead of the engine, or gold rush continues

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The body's response to the infection sometimes causes more severe pain than the infection itself. The same applies to the impact of the epidemic on the economy.

Like financial crises, epidemics create widespread uncertainty, and sometimes panic.

The sharp drop in the US stock market last Monday reflected fears that the reaction to the spread of coronavirus in other countries could become as severe as in China.

Goldman Sachs experts predict that economic growth in the United States will slow down by 0.8% year on year due to declining tourist flows, exports, and supply chain disruptions, but by the end of the year this slowdown will be largely offset.

"The fear of the virus so far spreads around the world much faster than the virus itself," analysts say.

Markets fear that further spread of the infection will have a negative impact on the global economy.

Gold has traditionally been considered a defensive asset in which players invest in situations fraught with recession or serious economic shocks.

On the eve of the course, the precious metal reached a seven-year high, soaring above $1,690 per ounce. Gold rose by a record 2.7%. Until that moment, the highest growth of quotations within one day took place in June 2016. Then the results of the referendum in the UK became known, as a result of which the inhabitants of the country decided to leave the European Union.

Today, the precious metal broke the five-day growth band and retreated in the region of $1650 per ounce. The main reasons for this correction are short-term overbought and profit taking, the precious metal has risen in price by more than 9% since the beginning of the month.

Although gold has already updated multi-year highs, experts do not yet see global reasons for the reversal of the upward trend.

Goldman Sachs expects the precious metal to continue to rise in price. The main drivers are low interest rates on US government bonds, weakening stock markets and the coronavirus epidemic, which began to spread outside of China.

"If, according to the results of the first quarter, it is not possible to slow down the spread of the virus, then the cost of precious metals may rise to $1,750 per ounce, and if the situation worsens in the second quarter, it will rise to $1,850. Much will depend on the measures taken by central banks and national governments against the backdrop of a deteriorating situation in the global economy," bank strategists believe.

The material has been provided by InstaForex Company - www.instaforex.com