When People Riot, Should We Call Military Or Gold?

When People Riot, Should We Call Military Or Gold?

The comments below are an edited and abridged synopsis of an article by Arkadiusz Sieron, PhD

Could 2020 end, please? The pandemic is not over, and now the US has mass riots across the country that could aggravate the Covid-19 crisis and increase the demand for gold. The civil unrest should be positive for gold, for three reasons.

First, geopolitical risks concerning the US could spur the safe-haven demand for gold. Geopolitical factors do not drive the long-term trend in gold, but they help in the short term. Gold has been consolidating around $1,700, perhaps preparing for a further upward move.

Second, mass protests during the pandemic are a problem. You don’t have to be a scientist to deduce that big demonstrations and large gatherings could accelerate the viral spread and increase the chances of a second wave of infections or hamper the deceleration of the epidemic.

Although the reason for the protests was police brutality against the black community, the long period of social distancing and economic lockdown, spurring high unemployment, aggravated the civil unrest. The premature reopening and riots are a bad combination from a health/economic point of view, but supportive for gold.

Third, civil unrest could slow the economic recovery from Covid-19. The violent protests and looting destroyed stores and buildings, subtracting from the GDP. Many people reduced their economic activity due to the Covid-19 outbreak; the protests added to the uncertainty and subdued consumer spending and business investment. So the riots could support the gold price, especially if they contribute to the depreciation of the US dollar.