Gold hit $ 1,944 an ounce on Monday, beating its previous record of $ 1,921 set in 2011. It has now gained about 27% so far this year. Silver also received a boost, rising more than 6% to hit $ 24.21 an ounce, dwarfing Thursday’s seven-year high.
“Gold is the clear beneficiary of safe-haven demand,” said Stephen Innes, chief global markets strategist at AxiCorp, in a research note.
The main driver of the gold recovery has been falling U.S. government bond yields, reflecting the likelihood that the Federal Reserve will have to keep interest rates lower for an extended period to supporting economic recovery, according to Hussein Sayed, chief market strategist. at FXTM. That has also served to weaken the US dollar, which is trading at a 22-month low of 0.85 euros and a 4-month low against the Japanese yen.
“That is partly due to the feeling that the United States is having a harder time controlling the virus than others, which will underperform the United States economy,” said Kit Juckes, chief strategist at Societe Generale.
There is mounting evidence that the fragile economic recovery in the United States is already stagnating, as the number of coronavirus infections and deaths increases. Unemployment claims are rising again for the first time in months, and there is concern that the maturity of Washington’s $ 600 increase in unemployment benefits, which will end on Friday, will deal another blow to consumer spending.
Austan Goolsbee, who chaired President Barack Obama’s Council of Economic Advisers after the 2008 financial crisis told CNN Business that the United States could have another financial collapse if the pandemic is not controlled quickly.
“Whoever gets there in January 2021 could be facing worse conditions than in 2009, as hard as it is to believe,” Goolsbee said, referring to the upcoming presidential elections.
Worrying signs in Europe too
Elsewhere, sentiment remains fragile after a surge in coronavirus cases in Spain, prompting the UK government to impose a 14-day quarantine on all people returning from the country. Investors fear the restrictions could be extended, delaying the economic recovery.
The increase has already affected flight bookings, according to Ryanair (RAY) CEO Michael O’Leary. Europe’s largest low-cost airline now expects to carry 60% fewer passengers during the 12 months through April 2021, compared to the previous year. “That will completely depend on there not being a second wave of Covid-19 in the [fall] and winter, “O’Leary said Monday.
In a new report Released on Monday, EY economists forecast that UK GDP will contract 11.5% in 2020, compared to the 8% drop they expected in June. A second wave of coronavirus and the failure of post-Brexit trade talks with the EU would make matters worse.
“The UK economy may have passed its low point, but it seems increasingly likely that the rise will be much longer than expected,” said Howard Archer., EY’s chief financial advisor.
– Matt Egan and Julia Horowitz contributed reporting.
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