After the outbreak of the COVID-19, we are now all epidemiologists! We explain what does an “epidemic” means in another dictionary entry. But what is a  pandemic and how it differs from an epidemic?

To call an epidemic a “pandemic”, three criteria generally need to be met. First, it needs to cause disease or death. Second, there must be sustained transmission between people. And third, it must be spreading in multiple countries. This is the key difference: pandemic is in essence an epidemic with much higher geographical spread. Pandemic affects most countries across all continents, or even the whole globe. This is why the COVID-19, which has been reported in more than 120 countries, has been officially designated as pandemic.

However, the geographical is not the only difference between epidemic and pandemic – another is, as WHO Director-General, Dr. Tedros Adhanom Ghebreyesus said, “we have never before seen a pandemic that can be controlled”.

Pandemic and Gold

What is the link between a pandemic and gold? Well, gold may be a safe-haven asset during a pandemic, as disease outbreak disrupts the economic activity and increases the uncertainty, leading sometimes to a stock market correction. However, a lot depends on the given pandemic. If it is a pandemic that does not reach the US, then any impact on the gold market should be limited and short-lived.

The best example might be the severe acute respiratory syndrome (SARS) which was caused by the SARS coronavirus traced to the bats. The pandemic started in Guangdong Province, China, in November 2002 and ended only seven months later in June 2003, peaking epidemiologically in March 2003. According to the World Health Organization, the incidence was 8096 cases with 774 deaths, resulting in a case-fatality rate of 9.6 percent.

As the chart below shows, the price of gold has increased during the SARS pandemic. However, the peak of the outbreak was between February and May 2003 – and in this period, the price of the yellow metal declined. In other words, gold peaked in February 2003, and then declined until April despite the pandemic being still in full force. 

Chart 1: Gold prices during SARS flu pandemic (London P.M. Fix, in $).

Pandemic and gold chart

In contrast, the COVID-19 was more positive for the gold prices, as it affected not “only” 37 countries as SARS did, but practically the whole globe, including the whole of Europe and the United States. And when it hit, China has been much more important industrial and economic country than in the times of SARS. The chart below shows that the price of gold increased amid the outbreak of COVID-19 until the pullback in mid-March. However, as the COVID-19 is far from being contained, gold prices may rise further in the future.

Chart 2: Gold prices during COVID-19 pandemic (London P.M. Fix, in $).

Pandemic and gold chart

Pandemic and Silver
As silver is highly correlated with gold, its price should follow the gold prices. Indeed, as the chart below shows, silver behaved similar to gold during SARS pandemic.

Chart 3: Silver prices during SARS flu pandemic (London Fix, in $).

Pandemic and gold chart

However, silver is also an industrial metal. So, a pandemic which hits the global economy, can be worse for silver’s performance than for gold’s performance. Indeed, as the chart below shows, the price of silver declined from January to mid-March, rising only briefly in the second half of February. 

Chart 4: Gold prices during COVID-19 pandemic (London Fix, in $).

Pandemic and gold chart