True Scale of Economic Damage Has Not Yet Been Reflected in Data

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Economic data has not yet reflected the true scale of the economic disaster we are facing, but as numbers come out in the coming weeks, a risk-off sentiment could ensue, this according to Jim Wyckoff, senior analyst at Kitco.

“We have big risks still ahead for the U.S. economy and for other economies around the world,” Wyckoff told Kitco News. “We are going to start to see economic data in the U.S. and in Europe show up that’s going to be really staggering, to remind us how serious the damage has been done to the global economy.”

Additionally, there remains uncertainties with how long the shutdown will continue, as well as how a recovery could ensue, he said.

“We don’t know how this COVID-19 is going to play out. Is there going to be a resurgence of sickness later on in the fall? How fast can businesses re-open? Those are just big unknowns right now,” he said.

Gold prices traded down 1.7% Thursday while stocks also saw a decline, with the S&P 500 losing 1.3% on the session.

Gold and risk assets have traded in parallel before, particularly during market downturns, like the one that happened in March.

Wyckoff attributed the selling of gold and its subsequent positive correlation with equities to extreme fear in the marketplace.

“When we got into the COVID-19 pandemic scare and markets reacted initially, the gold market sold off. That’s because there was so much fear and near panic in the marketplace that even the buyers of safe haven assets, including gold, were afraid to step up,” he said.

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