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The buying ran gold to a seven-year high and dropped the 10-year yield within a few basis points of its record low as global equity markets were roiled after South Korea, Italy and Iran all reported a surge in the number of new coronavirus cases.
"The expectation had been this would be a relatively short-lived and it would be a V-shaped recovery off whatever happened first quarter, second quarter, but second half we kind of claw it all back and it would all be good. The view was also that we'd see things relatively contained within China," Keith Banks, head of investment solutions at Bank of America, told FOX Business’ Maria Bartiromo on Monday.
"Obviously not the case. As a result I think now investors are starting to think it won't be a V-shaped recovery, but maybe more of a U-shaped recovery, and that has implications for growth, that has implications for inflation, that has implications for rates, and it has implications for earnings."
South Korea reported 161 new cases and two deaths Monday, raising its respective totals to 763 and seven. Elsewhere, Italy and Iran said the number of new cases jumped to 152 and 43, respectively.
Meanwhile, China's National Health Commission reported 409 new cases and 150 deaths on Monday, raising the totals on the mainland to 77,150 and 2,592, respectively.
The spreading virus caused panic among investors, running front-month gold futures up for an eighth straight day Monday. The precious metal gained more than 2 percent early Monday, hitting a seven-year high of $1,691.70 an ounce. Futures with an April expiration have gained 8.4 percent since the coronavirus was first to have reported spreading outside of China on Jan. 20.
As traders bought gold, they also piled into U.S. Treasurys. Heavy buying pushed the yield on the 10-year note down 7.88 basis points to 1.392 percent. The yield was within a handful of basis points of its all-time closing low of 1.376 percent, set in July 2016. The 30-year yield was already at a record low down 6.6 basis points at 1.851 percent.
The virus, which has caused the lockdown of more than 60 million in China, has paralyzed supply chains and caused companies to temporarily shut down or reduce operations on the mainland. A number of companies, including Apple, have warned disruptions caused by the virus will impact their financial results.