The coronavirus epidemic is causing significant damage to the economy. The public pension system is no exception and its situation, already critical in itself, is going to be aggravated by the increase in unemployment. In these circumstances, it is advisable to take action before it is too late: experts consider that gold is the best formula to protect assets and prevent purchasing power from falling when you reach retirement age.
The economic data begins to reflect the seriousness of the situation that lies ahead once the Covid-19 epidemic has reached its point of highest incidence and begins to subside.
Indeed, during the first quarter of 2020, GDP suffered a 5.2% drop compared to the previous quarter. This is the biggest drop in the economy since the INE began its historical series, in 1970.
Even in the 2009 crisis, there was no such setback: in the first quarter of that year, GDP contracted by 2.6%, in what was its biggest drop to date.
The paralysis of the economy caused by the declaration of the state of alarm on March 15 has been the main cause of this collapse, which could be even worse in the second quarter of the year.
The situation of the Social Security fund is not rosy either: at the end of 2019, its deficit had risen to 16,052 million euros, 1.3% of GDP . According to the Institute for Economic Studies , this deficit will grow at least to 3% of GDP, which is equivalent to a hole of 37,350 million euros .
One of the reasons why this deficit is skyrocketing is the collapse of social contributions by workers and employers, which constitutes the main source of income for the system.
A situation that could get worse, since the Ministry of Labor estimates that unemployment will increase by another three million people between now and the summer, to which will have to be added a million and a half self-employed who are going to stop paying their quota.
Faced with this disaster, the so-called 'pension piggy bank', which came to have 66,815 million euros in 2010 , now barely has 1,400 million , insufficient for a monthly expense of about 10,000 million euros on pensions .
The solution to which the Government has been resorting in recent months, of financing the expense of pensions through loans or transfers to Social Security, is not such, since as they point out from the Foundation for Applied Economics Studies (FEDEA) , that only serves to change the site problem.
Pension Plans In Free Fall
Nor does the pension problem seem to be solved by relying on other assets that have traditionally been presented as complementary to the public system: private pension plans .
According to the latest data published by the consultancy Vdos , all pension plans have obtained a negative return during the first quarter of 2020.
In total, the assets managed by the pension plans of the individual system have been reduced by 7,474 million euros during the first quarter of the year, a fall of 9.68% that leaves the total at 69,754 million.
By categories, the best results were those of monetary pension plans , with an average drop of 1.44% , followed by guaranteed fixed income ( -1.48% ) and international fixed income (-1.81%) .
The economic crisis that is looming as a result of the coronavirus pandemic is going to be deeper than the one we experienced in 2008, according to the latest report from the International Monetary Fund. Faced with this situation, the safe haven asset par excellence, gold, is acting as expected of it, with a significant rise in its price. Therefore, prudent investors are turning to the most in-demand asset at the moment: investment gold coins.
The stoppage of economic activity forced by the control measures of the coronavirus epidemic on a global scale will cause a serious economic crisis, which will be worse than that of 2008 and on a scale only comparable to the Great Depression of 1929.
This is stated by the International Monetary Fund , in whose latest World Economic Outlook report they estimate that the global economy will contract by 3% in 2020, a much worse figure than the 0.1% drop that was recorded during the recession in 2009. The recovery will not begin until 2021, with global growth estimated at 5.8%.
The IMF report considers that the crisis caused by Covid-19 is unparalleled in history and calculates its possible cost at more than 9 trillion dollars .
Gold Rises In Price
Faced with such a scenario, gold, a refuge asset par excellence, which usually shows its best face in crisis situations, is behaving as expected: between January 2 and April 14, 2020, the precious metal has revalued by a 14.07%, going from 1,527.10 to 1,741.90 dollars an ounce , according to data taken from the London Bullion Market Association (LBMA) .
The comparison is even more striking if we take the figures for the last 12 months: between April 15, 2019 and April 14, 2020 , the price of gold has grown by 35.49%, rising from $1,285.65 an ounce last year to the aforementioned 1,741.90.
Despite the fact that during the month of March there was some volatility in the price of gold, at the same time that the capital markets collapsed by up to a third of its value, the metal took flight and has not stopped rising since then.
Various analysts have attributed this movement to the need for many investors to liquidate their positions in gold to obtain funds with which to offset their losses in riskier assets such as shares.
An effect that was also recorded at the end of 2008, when the financial crisis began, an argument that analysts have also recalled these days.
Added to this rise in the price of gold is another factor that has played in its favor: the restrictions imposed by various countries to control the coronavirus epidemic have forced the temporary closure of mines, mints and refineries around the world.
In Europe, for example, three of the largest refineries, located in the canton of Ticino (Switzerland), were forced to stop their activity for several weeks between the months of March and April, which caused a considerable shortage of physical gold in the continent.
Although its activity has resumed with certain restrictions , this shortage is still felt and has forced many merchants to alert their customers of the lack of stocks to cover demand.
United States Mint
The same has happened with the mints: some of the most important, such as the United States Mint , have just announced that they are not going to mint any more coins at their mint in West Point (New York) and that they do not have any gold coins. investment companies (American Eagle and American Buffalo) to supply traders.
Gold Coin Sales Increase
This contraction in supply due to the closure of mints and refineries occurs at a particularly delicate moment for the market, since demand was increasing considerably, spurred on by investors seeking a refuge in gold with which to protect their assets in the face of the crisis. what is coming right now.
Gold Coin As Protection
In fact, some mints were recording historic sales figures: the US Mint itself, for example, sold 142,000 one-ounce gold American Eagles last March, a figure that is 1,928.6% higher than sold in February and 1,134.8% of the 11,500 that were sold in the same month last year .
In the first quarter of the year, the number of gold American Eagles sold was 209,000, 132.2% more than in the first quarter of the previous year.
Gold American Buffalo sales figures were also very positive , with 47,500 ounces in March, 763.6% more than in the same month of 2019. In the first quarter, gold American Buffalo sales rose to 69,500 ounces, 98.5% more than in the same period last year.
The same fate befell the gold products of the Australian Perth Mint , which sold a total of 93,775 ounces of gold in March ( including bullion and coins), which is the highest figure recorded since April 2013.
The demand for gold products has been so high during the last days of March that the Perth Mint exhausted its stocks of one kilogram of gold bars, the most requested.
Gold Coins, The Investment Of The Moment
Faced with this situation, with a crisis in the offing and the price of gold at its highest level in the last seven and a half years, it can be said that the current investment is gold coins , due to their revaluation and adjusted entry price.
Those who have invested in this variety of physical gold may be satisfied, since their heritage is more than protected and, as soon as the price evolution follows the projections estimated by analysts and banks, they may find themselves with the pleasant surprise that gold it registers its maximum historical price in 2021, exceeding $1,900 an ounce.
Those who have not yet done so still have time, although they are going to have more problems finding supply, since traders around the world are liquidating their last pieces and do not know when they will be able to replenish stock.
The market situation is also favoring these traders, who are raising their margins and charging up to a 10% premium over the spot price of gold in the currencies they sell , when this margin is usually well below 3%.
Some experts already advised, in mid-March, to take advantage of the slight drop in the price, which dropped to around $1,400, to bet on gold, following the old investment maxim: buy low and sell high.
In any case, all of this goes to show that investing some of your savings in small pieces of gold, be it coins or bars, is always a smart move. We are seeing with our own eyes that, in times of crisis, gold skyrockets. And that is a lesson that we have to assume for the future.…