File photo of gold bars seen at a gold and silver separating plant.
HONG KONG: Gold hit a record high on Monday (Jul 27) as investors rushed into the safe-haven on concerns about China-US tensions, a spike in virus infections around the world and a lack of progress on a new stimulus bill in Washington.
After months of healthy rallies across equity markets, fuelled by trillions of dollars in government and central bank support, traders are beginning to step back as they weigh the long-term economic impact of the coronavirus.
With vast monetary easing measures put in place by the Federal Reserve pushing the dollar lower against most other currencies, gold is flying, hitting an all-time high of US$1,944.71, well above its previous record of US$1,921.18 seen in 2011.
“And as long as the (virus situation) gets worse, the market is discounting more stimulus for a longer period of time and in bigger quantities, and all of that is bullish for gold,” he added.
Eyes are on the Fed’s next policy meeting this week, with some predicting further measures to boost the economy – possibly negative interest rates – that could put more pressure on the dollar and send bullion above US$2,000.
There are also concerns that a worse-than-forecast reading on second-quarter US gross domestic product could spark another dollar sell-off.
While the weak dollar has been a key catalyst for the metal’s advance, gold has also been boosted by its attractiveness as a haven in times of turmoil with China-US relations souring by the day.
Gold tends to benefit from widespread stimulus since it is considered a hedge against inflation and currency debasement.
“Strong gains are inevitable as we enter a period much like the post-global financial crisis environment, where gold prices soared to record levels as a result of copious amounts of Fed money being pumped into the financial system,” said Gavin Wendt, senior resource analyst at MineLife.
