Leonhard Foeger | Reuters
Gold prices rose to a record high on Friday as investors sought security in the precious metal amid mounting tensions between the United States and China and lingering fears about the coronavirus pandemic.
The August metal futures contract rose 0.4% to hit $ 1,897.50 an ounce, according to CME Group data. This also marked the sixth consecutive day of gold earnings. Gold also had a seven-week winning streak.
Tensions between China and the United States increased this week. Overnight, China ordered the United States to close its Chengdu-based consulate. Earlier this week, the United States closed a Houston-based Chinese consulate.
“Tensions between the United States and China continue to rise, prompting a risk-free movement in the markets on Thursday and Friday,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note. He noted that gold is also one of the best-performing assets this year, up more than 24%. He also said that political uncertainty is likely to persist throughout the year, which he said could lift gold to $ 2,000 an ounce.
Haefele also noted that the highest movement in gold occurs when the US dollar has recently fallen sharply. The dollar index, which measures the performance of the dollar against six other currencies, has fallen more than 1% this week and has fallen for five consecutive weeks.
“While we believe that gold will continue to be underpinned by mounting geopolitical tensions, in our view, the main drivers of the gold price are its negative correlation with real interest rates and the dollar,” he said.
Gold gains also come as the coronavirus pandemic continues to devastate the global economy. Data compiled by Johns Hopkins University showed that more than 15 million coronavirus cases have been confirmed worldwide.
In the US alone, more than 4 million infections have been reported along with at least 144,552 deaths. Several states and countries have had to postpone or reverse reopening plans as cases increase.
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