Every week seems to bring more and more bad news about the Chinese coronavirus. While new cases and new deaths seem not to be accelerating, much of the country remains completely shut down. With about 30% of the US semiconductor sector dependent on products from China, that could put a major damper on US industry.
Apple has already warned that its sales and revenues will likely be significantly affected by the continued shutdown in China. Foxconn, one of its major suppliers, is only operating at about 10% capacity right now. And with cities and transportation networks shut down in attempts to keep the virus from spreading, even those goods that are being produced will have great difficulty getting to ports and markets.
Numerous other companies around the world are warning that their supplies of parts are running low, dependent on imports from China. Unless Chinese firms are able to get up and running in the next week or two, many factories in the West will have to minimize their operations or even shut down completely due to a lack of inputs.
In China, shipments of food are stacking up at ports, since there aren’t enough drivers to transport them to markets. And with many Chinese citizens only being allowed to venture out to markets every other day, the Chinese people will soon have real difficulty feeding themselves.
Fears about the coronavirus’ effect on the economy will soon become reality, as the virus’ effects on the Chinese economy have been severe. With the world’s second-largest economy all but shuttered, it will take weeks or even months for Chinese industrial production to get back to normal. And even when it does get back to normal, there’s no guarantee that it will stave off a potential recession.
It’s no wonder then that investors are turning to gold, which shot above $1,600 yesterday during mid-day trading. That’s the highest level it’s been at in years, and a sign that investors are finally taking seriously the likelihood of economic contraction. Stock markets were hammered, with the Dow Jones down over 200 points at one point on Tuesday. While markets recovered toward the end of the day, the coming weeks will undoubtedly bring weaker stock markets and higher gold and silver prices, as investors around the world look to protect their assets.
This article was originally posted on Goldco.
