(Bloomberg) – Spot gold broke its long-standing record as the dollar plummeted and concerns about the global economy fueled demand for paradises. Silver rode on his skirts, jumping to the highest in nearly seven years.
The bullion move, which can drive it to pull $ 2,000 an ounce, came as a dollar indicator fell to the lowest in more than a year amid negative real rates in the US and bets that the Reserve Federal will keep the policy complacent when it meets this week. Relentless investor demand has helped drive price gains, with gold-backed exchange-traded fund inflows this year already exceeding the record set in 2009.
Spot gold rose to $ 1,944.71 an ounce, surpassing the previous all-time high in 2011 by more than $ 20. Comex futures rose to a record $ 1,966.50 as a contract roll provided a further boost to its recovery .
Investors have turned to gold when the success of the coronavirus pandemic in global growth supports its safe haven status. But the metal is receiving support from a long list of factors: geopolitical tensions are rising, real rates have fallen, the dollar is weaker, and the government and central banks around the world have unleashed large stimulus measures to try to boost economies.
“Strong gains are inevitable as we enter a period similar to the post-GFC environment, where gold prices soared to record levels as a result of the large amount of Fed money being injected into the financial system.” , with a weak dollar and negative real rates, giving further momentum, said Gavin Wendt, senior resource analyst at MineLife Pty. Gold could consolidate before setting its target of $ 2,000 and more in the coming weeks, he said.
The message behind the Gold Rally: The world economy is in trouble
The current environment has even raised the specter of stagflation, a rare combination of slow growth and rising inflation that erodes the value of fixed income investments. In the US, investor expectations for annual inflation over the next decade have increased in the past four months after falling in March.
US bond markets have been a key measure to consider in determining the path to gold, with the metal serving as an attractive hedge as Treasury bond yields that eliminate the effects of inflation fall below zero.
Gold and bond traders will receive a turn from the Fed this week, as officials meet July 28-29. Expectations are that they will keep interest rates close to zero, while markets will also be on the lookout for any signs of changes in strategy.
Read more: The Fed will debate the possibility of mitigating prospects as the virus increases and fiscal aid is blocked
The meeting may be a platform for a strong message that change is coming, opening up the possibility of more unconventional policies later, according to Chris Weston, head of research at Pepperstone Group in Melbourne. “If we think about real yields and what the Fed is doing, it simply suggests to me that it is a matter of time before real returns continue to fall and gold rises.”
Growing concerns about the virus pandemic, as well as deteriorating relations between the United States and China, add to the appeal of gold, and most analysts are optimistic about the prospects for the metal. Goldman Sachs Group Inc. said the metal could hit $ 2,000 in the next 12 months, and Citigroup Inc. has a 30% chance that prices will exceed that level by the end of this year.
Spot gold is trading at $ 1,931.51 an ounce at 12:25 pm in Singapore. Newcrest Mining Ltd., Australia’s largest gold producer, advanced as much as 5.3% in Sydney trading as Hong Kong-listed Zijin Mining Group Co. Ltd. shares rose as much as 7.9% .
Silver followed bullion higher, rising more than 7% to $ 24.3993 an ounce, the highest since 2013.
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