Dow dives more than 800 points after the US Centers for Disease Control and Prevention, (CDC) warns of coronavirus inevitability in US,  It reports on the a top CDC official, Nancy Messonnier, the director of the CDC’s National Center for Immunization and Respiratory Diseases, who told reporters on a call that, “ultimately, we will see community spread in this country" and “It’s not a question of if but rather a question of when and how many people in this country will have severe illness.” The news was elevating concerns that the public health emergency could soon become a full-scale pandemic, weighing heavily on US stocks on Tuesday. 

The announcement signals a change in tone for the US agency, which had largely been focused on efforts to stop the virus from entering the country and quarantining individuals travelling from China. However, today's warnings are alerting Americans to begin to prepare for community spread of the new coronavirus after reports this week of new cases in several more countries.To date, investors have been erring on the side of caution, although reluctant to sell holdings in what could have otherwise been a mere bump in the road heading into that is presumed to be a US Trump election victory and a positive year for the stock markets, which is already ten years into a seven-year of normal cycles. However, the weekend news of the contagion of the virus spreading to all corners of the world sparked a flurry of supply this week.

Following Monday’s session, which was the market’s worst in two years, weak longs are bailing on Tuesday as well in anticipation of an expected effect on global markets – today's rout has seen the DJIA fall 800 points and the S&P 500 fall 500 points. The coronavirus epidemic is, unfortunately, making its presence well known. Actually, it spreads quickly around the globe. The worldwide number of confirmed cases has reached almost 90,000, while the death toll has surpassed 3,000 people. Three important developments have occurred over the weekend and since our last edition of the Fundamental Gold Report. First, the World Health Organization reported on Sunday that “the number of confirmed cases in Hubei province, China, has increased for two successive days after a period of decline.” It means that the epidemic in China may not be peaking yet, especially as China counting methods (excluding asymptomatic infected individuals) may underplay extent of outbreak, according to Caixin.

Second, the new coronavirus infections soared across Europe on Sunday. The situation is particularly grave in Italy, where confirmed cases jumped 40 percent in 24 hours to 1,576 (and to 1,713 on March 2), adding a great burden on the country’s healthcare system. However, the number of infections have also jumped in France (to 130 cases), Germany (130 cases), Spain (74 cases), and the UK (36 cases). As the whole continent will be infected soon, the economic effects will become greater. The French government has already admitted that the effect of the coronavirus will be larger than previous estimates and promised to provide the necessary support to companies. With slower economic growth across France and the whole continent being already fragile, guess what Christine Lagarde will do? Yup, she will hurry with help and the ECB will remain accommodative or even ease its monetary policy even more.Third, the more decisive spread of the coronavirus across the United States is a matter of time. The number of cases has increased to more than 80, while two people have already died. The governor of Washington, where these deaths occurred, has already declared a state of emergency. The Vice President Mike Pence admitted that we “could have more sad news”. These developments will lead to the intensification of fear among Americans, spurring possibly some safe-haven demand for gold. What does it all mean for the yellow metal? Well, from the fundamental point of view, growing fears that the spreading coronavirus will weigh on global growth, the dovish central banks, a weaker US dollar and the stock market volatality should all support gold prices.

We are, of course, fully aware that the price of gold plunged on Friday, as the chart below shows. But we warned our Readers that a downside move was likely, given the scale of previous huge rally. The sell-off could be, thus, a normal profit-taking for those wishing to cash in on the runup.