As the stock market takes a beating, Jim Cramer has come out forcefully in favor of buying gold. Here’s why he thinks this is the right time to make the move.
In a recent series of tweets, veteran analyst and host of CNBC’s “Mad Money” show Jim Cramer shared his insights on the best plays that investors can make during times of unprecedented market panic related to the coronavirus.
Initially a contagion that was mostly confined to China, the coronavirus has since spread throughout the globe and has, as of Wednesday, infected more than 121,000 people and claimed over 4,300 lives. On the same day, the World Health Organization officially declared the coronavirus a global pandemic, with the WHO Director-General Dr. Tedros Adhanom Ghebreyesus mincing no words at an emergency press conference and adding that both the speed at which the virus is spreading and the ineffective response to it are giving cause for alarm.
Cramer, like many others, believes that gold is the place to be in as the crisis unfolds, stating that it’s still not too late to jump on the safe haven wagon. Cramer’s words come as both gold and the broader market experience action that ranges from peculiar to dismal.
While stocks have seen selling across the board ever since the virus began threatening global economies, last Monday was a particularly gruesome point for a market that was testing its highs not too long ago. Despite posting its worst trading day since the 2008 financial crisis on Monday, stocks continued tumbling throughout the rest of the week, as exemplified by the Dow dropping another 1,300 points on the day of the WHO’s announcement.
Gold’s trajectory has been difficult to interpret for many. Perhaps the most notable price action happened at the start of the week, when gold met numerous bullish forecasts by launching above $1,700 for the first time in more than seven years. Since then, the metal has trended lower and closed Friday’s trading session slightly above $1,500.
Although the whirlwind in the gold market might seem confusing, a look at the previous weeks shows that the price movement is in line with an overwhelming rush to liquidity. Over the past few weeks, gold was likewise affected by the broader selloff, but managed to inch back up every time as other assets kept tumbling down. Even Friday’s levels still represent a six-year high, showing that the market is far from the dire straits seen in other asset classes.
Cramer noted that the same investment rules he always sticks to are very much applicable in gold’s case, stating that people should look at an asset’s prospects and make calm decisions instead of succumbing to panic selling. With gold being perhaps the only reliable haven asset left, and with all the factors that have driven its incredible price jump since the summer of 2019 only becoming more prominent, plunges such as those on Friday represent an exceedingly attractive entry point.
Cramer rounded up his views by stating that the coronavirus has already had a severe impact on the global economy, with multiple sectors falling into recession, and that there aren’t many assets that investors should want exposure to in the current climate.