Gold continued its upward climb today and made history by touching record prices as worries over the coronavirus pandemic and intensifying U.S.-China tensions weighed on investor sentiment.
Spot gold surged 2% to US$1,940.96 per oz. by 11:15 a.m. EDT. Earlier in the day, the spot price set an all-time high by trading at US$1,945.10 per ounce, topping the previous high set in September 2011.
Gold futures for December delivery, now the most actively traded contract, rose 1.9% to $1,962.40 per ounce on the Comex in New York.
Bullion’s latest surge came as the U.S. dollar sank to its lowest in more than a year, which is just the latest of a series of bullish factors that are pushing prices higher, including negative real interest rates and bets that the Federal Reserve will keep an accommodative monetary policy when it meets this week.
“Gold is the clear beneficiary of safe haven demand,” Stephen Innes, chief global markets strategist at AxiCorp, said in a research note.
So far this year, bullion has risen over 20% on the back of growing economic and geopolitical concerns around the globe — and the record run may not be over yet.
Analysts at UBS expect gold to reach US$2,000 per oz. before the end of the year. Some in the market suggest the haven could rise even further.
Gold is in “perfect condition to move higher,” ANZ commodity strategist Soni Kumari told Reuters, as central banks push for liquidity amid the pandemic. “Further support is also coming from falling yields, weaker dollar and geopolitical tensions between the US and China. The safe-haven demand (for gold) has been rising while there is none for USD anymore.”
Meanwhile, Covid-19 cases surged to over 16.13 million globally, driving expectations for more stimulus to stem the economic blow.
“As long as the [virus] situation gets worse, the market is discounting more stimulus for a longer period of time and in bigger quantities,” Edward Meir, analyst at ED&F Man Capital Markets, told Reuters.
Nascent signs of gold’s record-breaking run began to show in 2019, when the Fed signalled a readiness to cut interest rates as uncertainty — primarily about the impact of trade wars — clouded its outlook.
The rally gathered pace in early 2020 as geopolitical tensions rose and the coronavirus outbreak pushed governments and central banks to unleash vast amounts of stimulus, sending real interest rates further into negative territory.
“Strong gains are inevitable as we enter a period much like the post-GFC environment, where gold prices soared to record levels as a result of copious amounts of Fed money being pumped into the financial system,” Gavin Wendt, senior resource analyst at MineLife Pty, told Bloomberg.
“A weak dollar and negative real rates are providing further impetus. Gold may consolidate before setting its sights on US$2,000 and above in coming weeks.”