Editor’s Note: Today’s Wealthy Retirement comes from our good friend Rich Checkan, president of Asset Strategies International and an expert in gold investing.
As you know, Wealthy Retirement is published by The Oxford Club. Asset Strategies International is one of The Oxford Club’s trusted Pillar One Advisors, vetted experts who we defer to when we have specific questions or concerns.
Rich and his team at Asset Strategies International are our go-to experts on gold and precious metals. Given the recent market correction, we asked Rich if now was the time to invest in gold.
So, today and tomorrow, Rich will offer his take on the overlooked drivers for a gold spike that predated the coronavirus panic’s flight to precious metals. Read on to discover why he believes the stock market was overdue for a correction.
And if you’d like to get in touch with Rich to learn more about Asset Strategies International, you can reach his office at 800.831.0007 or by clicking here.
– Mable Buchanan, Assistant Managing Editor
About a month and a half ago, just as the first reports of the coronavirus epidemic were coming out of Wuhan, China, we provided our clients with an update on the gold and silver markets.
At the time, we listed several hypothetical events that might provide a catalyst for a stock market correction and resulting rise in gold prices.
One of those catalysts was a black swan event, such as a coronavirus epidemic. Unfortunately, we were right with that prediction.
But make no mistake – the switch in investor psyche from greed to fear was going to happen anyway. The coronavirus epidemic simply hastened it along.
First, let’s look at what has happened since last month.
Tomorrow, we’ll take a look at what you can expect next for gold.
COVID-19’s Rapid Spread
The very first reported instance of COVID-19 – the disease caused by this most recent strain of coronavirus – was in Wuhan, China, in December of last year.
Two-and-a-half months later, it has been reported in 71 countries, has accounted for nearly 90,000 infections and is responsible for more than 3,000 deaths.
Why all the concern? Why all the panic?
Simple: COVID-19 spreads quickly and has a relatively high death rate. That’s a one-two punch worth paying attention to.
Granted, deaths attributed to COVID-19 are less than 1 to every 216 of the deaths attributed to influenza… 3,000 versus more than 650,000. But the speed at which COVID-19 deaths occur is quite alarming.
The COVID-19 fatality rate appears to be somewhere between 2% and 3.5%. The death rate associated with the flu is roughly 0.5%. COVID-19 claims lives somewhere between four and seven times faster than the flu.
While all of the above makes perfect sense, what may not be as clear is why the stock markets of the world have reacted so quickly and so negatively to the virus’s spread.
Last week alone, the Dow Jones Industrial Average fell 14%. The S&P 500 fell 13%. The Nasdaq fell 12.3%.
Equities are now in official “correction” territory (a drop of 10%) because, simply put, businesses are adversely impacted by the threat of a pandemic.
On the extreme side of things, whole economies are being shut down to contain the spread of the virus. Buildings and even towns are facing quarantines in China, South Korea and Italy. Business has basically ground to a halt.
But worldwide, it goes even deeper than that. Air travel, tourism and international supply movements are also suffering. People and things are not moving across borders for fear of spreading the virus.
How long can businesses sustain themselves when they cannot deliver products to their customers?
Needless to say, a long-in-the-tooth bull market with excessive valuations and historically high price-to-earnings ratios is susceptible to a pullback with much less of a catalyst than the COVID-19 outbreak.
Whereas the stock market is vulnerable in such an environment, gold is poised to benefit.
Prior to the rise of COVID-19, the U.S. stock markets (the Dow, S&P 500 and Nasdaq) were all up around 10% on the year. Gold was actually in the midst of a short-term pullback.
Since then, they’ve all done an about-face. On the year…
- The Dow is down 9.4%.
- The S&P 500 is down 7%.
- The Nasdaq is down 2.8%.
- Gold is up 5%.
It is quite likely that this trend will continue.
Look for my follow-up article tomorrow. In it, I will dig deeper into the potential impact of what I suspect to be the strongest contributors to gold’s long-term appreciation…
- Upcoming Federal Reserve interest rate decisions
- Political unrest
- Social unrest
Keep Calm and Carry On…
I am no expert on viral replication or pandemics. But I am also no fearmonger.
I fully expect the COVID-19 outbreak to travel a bit farther – and unfortunately claim more lives – before its eventual defeat.
In the meantime, this epidemic has triggered a stock market correction that was long overdue. Those who protected themselves prior with the ultimate wealth insurance – gold – have done well.
But if you have not yet purchased your golden wealth insurance with personal and IRA funds, I strongly urge you to consider these steps now. The correction in the stock market is expected to continue.
Don’t panic. Seek the protection of gold. And look for my follow-up article tomorrow to see why I believe gold will reward those who own it… long after COVID-19 is relegated to history.