Although present in popular culture, the outbreak of COVID-19 has brutally reminded people of the risk of a pandemic. Some people panic unnecessarily, but their fear is understandable - after all, epidemics and pandemics (which are global epidemics) have accompanied humanity since the dawn of time, taking a serious toll. For example, the best known and the most devastating pandemic in human history was the medieval Black Death that killed 75-200 million people, reducing the Europe's population by 30 to 60 percent.

But are the fears about the new coronavirus justified? Must gold prices rally? Let's investigate the history of pandemics and draw conclusions for the current case, focusing - obviously - on the gold market. Investors should never panic but look to history as a guide. Although very interesting, we omit all the pandemics before the 1971, when the gold standard was abandoned and the yellow metal started to be traded freely. We also do not analyze numerous influenza epidemics, as they occur generally each year during the winter and impact primarily the elderly (majority of influenza-associated deaths are in persons over 64 years, whose immunity is weakened). We will analyze the pandemics visible in the table below, in this part focusing on the first two.

_{Table 1: History of global pandemics (source: own elaboration based on data from the World Health Organization and https://www.ncbi.nlm.nih.gov/books/NBK525302/)}

So, we start our overview with the HIV/AIDS pandemic, which originated in Africa in the 1920s. However, AIDS was not recognized until 1981, while HIV was not discovered and related to AIDS until 1983. In the 1980s and early 1990s, the outbreak of HIV/AIDS swept across the United States and rest of the world. Although the number of new infections peaked in 1999-2000 at 3.16 million people infected that year, it has not still been eliminated. Actually, it is one of the world's most fatal infectious diseases, particularly across Sub-Saharan Africa. As of 2017, almost 36 million people are infected with HIV globally, and almost one million (954,000) people died from HIV/AIDS in that year.

However, the gold prices did not rally in a response to the HIV/AIDS pandemic. The chart below displays the period of 1996-2001, when the number of new infections were above 3 million per year, with the peak of 3.16 million in 1999-2000. As one can see, gold remained in the bear market with only one significant rally but related not to the HIV/AIDS pandemic, but to the Washington Agreement.

_{Chart 1: Gold prices during HIV/AIDS pandemic (London P.M. Fix, in $).}

Why the financial markets do not panic because of HIV/AIDS? Well, the first reason is that HIV is spread not by droplet transmission, but primarily by unprotected sex and infected needles, so it does not spread as fast as the coronavirus and it is relatively easy to avoid the infection. Second, HIV does not kill right away, which makes it less frightening. Third, it is a well-known danger, while the new coronavirus is, well, new, which makes it look more dangerous. Fourth, the pandemic has been contained in the West, affecting mostly Sub-Saharan Africa right now. Whatever we think about it, global financial markets, including the precious metals market, react to geopolitical and health dangers only when they threaten economic centers of the world.

The second pandemic was 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 2: Gold prices during SARS flu pandemic (London P.M. Fix, in $).}

Another issue is that gold was already in the bullish trend. So although the SARS pandemic certainly did not hit gold, it seems that the yellow metal was more driven by the fundamental factors, such as the loose monetary policy after the burst of the dot-com bubble and the 9/11 attacks rather than by the SARS-related fears. The pandemic also coincided with the US invasion of Iraq and a bear market in the greenback.

Because COVID-19 is caused by the virus belonging to the same group of viruses as SARS coronavirus, and it also originated in China, it seems natural to compare the situation back then to now. Good news is that the COVID-19 is less deadly than SARS, as its case-fatality rate is 3.3 percent, compared to 9.6 percent of SARS. However, it is important to remember that the biggest economic costs of pandemics come not from mortality, but from people's efforts to avoid infection.

The bad news is that the new coronavirus spreads faster than SARS, as the latter led to a total of almost 8,100 cases over the course of 8 months, while the number of COVID-19 cases surpassed 80,000 in just two months.

Another key difference is that China's economy has become a more important component of the global economy and more intertwined with it. Given the trade wars and its much higher debt, it is also more vulnerable in certain dimensions than it was during the SARS outbreak (although it has more resources to contain the pandemic). Hence, the impact of COVID-19 pandemic on the global economy and, thus, the gold market might be higher than in the case of HIV/AIDS or SARS outbreaks, especially that it broke out during the global slowdown and the beginning of the gold's bull market.