By Geena Paul
LONDON (Commodity Online): A fuming volcano is holding the entire economy of Europe and several other nations to ransom as the world is pondering over the economic impact of this aerial attack for the past one week.

For those who are not in the grip of things, the Eyjafjallajokull volcano in Iceland is wreaking havoc with European air traffic by spewing lava and ash into the air. The volcano is sputtering and bubbling and will probably create a cone formation as the lava spills over and freezes into rock. So, the world is in the grip of an ash cloud now and economic pundits are busy calculating how this volcanic disruption will impact the economies of several nations.

Some analysts say that the situation is worse than the 9/11 terror attacks and the volcano can cause doom to the economic recovery some nations have managed after the recession.

If that is the case gold, which has seen a slight fall in the wake of Goldman Sachs fraud, will come back to reckoning with more and more investors shifting back to gold as safe haven. The volcano impact has been felt in the stock markets all over the world and investors are likely to pull out their money from equity and put it in gold again as the European economy may not see any growth this year also following the impact of the volcano ash.

It is still unclear how long the disruption will last, but the longer flights are grounded, the greater the impact will be on businesses and the wider economy.

The most direct casualty of the ash is the airline industry. The International Air Transport Association estimates that airlines are collectively losing £130m per day in lost revenues.

The impact on the tourism industry is also expected to be big with thousands of flights cancelled.

And tourism centres are set to witness a fall in people visiting because of the ‘air turbulence’. Bullion markets like Dubai totally depend on tourists to buy the yellow metal and if the number of tourists coming there is down then it will hit the bullion markets also.

But, gold has the traditional benefit of gaining from economic disasters because investors want to park their money in a safe place, that is gold at present.

For countries trading in perishable items, the flight disruption was a big disaster. Exporters of perishable goods, such as flowers, are being badly affected. Food exports from Africa and the Caribbean are among those hit, with reports of Kenyan farmers being forced to dump stocks of fresh food and flowers destined for European consumers.

According to a reports, the Kenyan economy is losing $3.8m a day as a result of flight cancellations to Europe. That scale of losses is expected to be repeated in agriculture-based economies across Africa and South America.

Businesses are also expected to lose money through cancelled meetings, stranded staff, and delays to air mail. Productivity in the UK is expected to suffer due to workers being unable to return to work.


Because of the volcano impact, a drop of between 1% and 2% for European economies is not being ruled out. That would mean a lot of European countries wouldn’t get any growth this year.

The eruption of ash cloud from the Eyjafjallajokull Glacier in Iceland, which began on April 14, has halted air traffic throughout central and northern Europe, leaving thousands of travellers stranded.

Flight disruptions caused by the ash cloud in Europe could severely hit the International Cricket Council’s plans for a smooth start to its World Twenty20 event on April 30 in the West Indies.

Most competing teams have travel plans routed via the United Kingdom and ongoing flight suspensions have pushed cricket’s governing body to look at possible rerouting.

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