Gold is on the cusp of challenging the hard-to-crack $1 800/oz mark, potentially opening the way for a move toward its record price, as a resurgence in coronavirus cases risks impeding the recovery of the global economy and fans demand for haven assets.
Futures have rallied to within 1% of the level last seen at the end of 2011, the year bullion notched its all-time high, as newly diagnosed cases of Covid-19 and other indicators of the pandemic’s spread soared in hot spots across the US Anthony Fauci, the country’s top infectious-disease doctor, warned on Tuesday that he’s seeing a “disturbing surge” in cases.
Bullion has jumped this year as the Federal Reserve and other central banks lowered interest rates, while governments worldwide pumped in trillions in stimulus to rescue economies hurt by the pandemic. Aided by concerns of currency debasement and a potential jump in inflation, investors are turning to gold as a store of wealth. With real US interest rates negative, banks such as Goldman Sachs Group now forecast it’ll hit a record $2 000 in 12 months.
“The rise in Covid-19 cases has been at the heart of the recent uptick in gold futures,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia, who’s tracking real yields. “A sustained decline in US 10-year real yields will provide support for gold futures. That is because as yields fall, gold looks more attractive relative to interest-bearing securities.”
Gold for August delivery rose as much as 0.6% to $1 791.80/oz on the Comex, the highest level since 2012, and traded at $1 789.40 at 8:32 a.m. in Singapore. Futures peaked at $1 923.70 in September 2011.
Among other main precious metals, spot silver climbed 0.2%, platinum added 0.1% and palladium gained 0.6%.