(Bloomberg) – Gold futures rose above $ 1,800 an ounce for the first time in eight years as low interest rates and a resurgence of coronavirus cases drive demand for the metal as a refuge.
Bullion is heading for its best quarter since early 2016, benefiting from economic stimulus from the Federal Reserve and other central banks, boiling trade frictions between the US and China and renewed concern over the economic consequences of the coronavirus. Investors also continue to accumulate in gold-backed exchange-traded funds, with record holdings.
“The $ 1,800 level is a psychological hurdle,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “Low interest rates, monetary policies, and the coronavirus are at stake.”
Ingots for August delivery rose as much as 1.3% to $ 1,804 an ounce at 11:23 am on the Comex in New York, the highest for a more active contract since November 2011. The move extends this year’s advance. to over 18% and marks a break from a trading range of months.
Gold hit record highs in September 2011, with futures rising to $ 1,923.70 and spot metal advancing to $ 1,921.17.
New hot spots are emerging and the World Health Organization warns that the worst of the pandemic is yet to come due to a lack of global solidarity.
The fate of the economy
“The fate of the economy is inextricably linked to the route of the virus,” New York Fed President John Williams said Tuesday in remarks prepared for a virtual event organized by the Institute of International Finance. “A strong economic recovery depends on the effective and sustained containment of Covid-19.”
Geopolitical tension has also increased after Chinese President Xi Jinping signed a landmark national security law for Hong Kong, a sweeping attempt to quell dissent that has already led to retaliation in the United States and could jeopardize the appeal of the city as a financial center. British Prime Minister Boris Johnson said he was “deeply concerned” about the measure, while the Trump administration promised “firm action” if Beijing does not reverse course.
Goldman Sachs Group Inc. said gold could rise to a record $ 2,000 an ounce in the next 12 months, while JPMorgan Chase & Co. recommended that investors stick to the bullion.
“The Fed is being extremely accommodating and because these closings are starting to repeat themselves globally, more central bank action is likely to be initiated,” Phil Streible, chief market strategist at Blue Line Futures in Chicago, said by phone.
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