(Bloomberg) – Gold traded above $ 1,900 an ounce for the first time since 2011, approaching its all-time high that same year as political tensions and worries about global growth fueled growth.
Growing signs that the protracted pandemic is slowing an economic recovery and the recent dispute between the United States and China support the appeal of the metal. Gold is also receiving support from a confluence of low or negative real rates, a weaker dollar and expectations of rising inflation amid massive injections of central bank liquidity.
Gold is heading for a seventh weekly gain, the longest stretch since 2011, while silver is poised for its biggest weekly advance in about four decades.
“When interest rates are zero or near zero, then gold is an attractive medium because you don’t have to worry about not getting interest on your gold and you see that the price of gold will increase as uncertainty increases in the markets.” Mark Mobius, co-founder of Mobius Capital Partners, said in an interview on Bloomberg TV. “I would be buying now and I would continue shopping.”
Spot gold was 0.9% higher at $ 1,903.94 an ounce at 9:06 am New York time. Prices are close to the record of $ 1,921.17 reached in September 2011. Spot silver also advanced.
Gold’s recovery may extend into 2021 “on dollar swings amid mounting geopolitical risks in an environment of longer interest rates,” wrote Eily Ong, analyst at Bloomberg Intelligence, in a note. UBS Group AG raised its short-term bullion forecast to $ 2,000 by the end of September.
Gold Rally could extend until 2021 on solid foundations: BI Focus
Precious metals funds posted investment inflows of $ 3.8 billion in the week to July 22, the second-largest weekly amount in history, strategists at Bank of America Corp. said, citing data from EPFR Global.
New highs
While gold spot prices are about $ 20 away from the all-time high, some futures contracts on the Comex are already trading even higher. December, which surpassed August as the highest open-interest contract according to data released when Friday’s Asian trading session was already underway, touched $ 1,927.10 an ounce on Thursday. That’s above the record for the most active contract of $ 1,923.70 reached in 2011.
On the geopolitical front, Secretary of State Michael Pompeo presented China’s leaders as tyrants bent on global hegemony. His comments came after the United States unexpectedly ordered China to close its consulate in Houston, after what it said were years of espionage led from the diplomatic complex. Beijing rejected the accusations and on Friday ordered the United States to close its consulate in the city of Chengdu, in southern China.
Also on investor radars is the possibility of new fiscal and monetary policy measures, as the path to recovery remains uncertain. Europe’s data for July showed a return to growth, but companies cut jobs for the fifth consecutive month. European Union leaders this week agreed on an unprecedented stimulus package.
The Federal Reserve meets next week to decide if more accommodation is needed, while President Donald Trump promised a “great third quarter” for the economy.
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