Gold traded at almost $1,900 per ounce. The precious metal is gradually edging closer to its all-time high that was set around nine years ago as worries about the global economic growth supported haven demand.
Growing indicators that the persistent health crisis is stalling an economic recovery and the increasing tension between China and the US are supporting demand for gold. Bullion is now heading for a seventh weekly gain which is the longest stretch since 2011. On its part, silver is also poised for its biggest weekly advance in almost 40 years.
A weaker dollar, the negative real rates, geopolitical uncertainties; and worries about the economic cost of the health crisis have put silver and gold on track for their biggest annual gain in ten years. Reports show that UBS Group AG increased its near-term forecast to reach $2,000 for gold by the end of September. The Group cited its qualities as a diversifier in a low-rate world.
Mark Mobius, the co-founder at Mobius Capital Partners, said:
“When interest rates are zero or near zero; then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold; and you see the gold price will rise as uncertainty in the markets is rising. I would be buying now and continue to buy because gold is really on a run, it’s doing well.”
Spot gold lost 0.2% to stand at $1,884 an ounce at 1:40 p.m. in Singapore. Prices had touched $1,898.34 on July 23 threatening to go for the record $1,921.17 hit in September 2011. On the other hand, spot silver remained constant at $22.6022 an ounce and it is expected to record its biggest weekly gain since 1980.
While the spot gold prices are around $40 away from reaching the all-time high; some of the futures contracts available on the Comex are even trading higher.
December surpassed August as the contract that has the highest open interest based on data published when July 24’s Asian trading session was already happening. It had reached $1,927.10 an ounce Thursday. That price is above the record set for the most-active contract of about $1,923.70 which was reached in September 2011.
While talking about the geopolitical front, Mike Pompeo, the US Secretary of State; referred to China’s leaders as tyrants who are bent on global hegemony. These comments came after the United States unexpectedly compelled China to shut down its consulate in Houston within 72 hours.
The order came after what the US officials said were many years of espionage; that are directed from the diplomatic compound against American commercial and national security assets. China has already rejected these accusations and on July 24, it ordered the U.S. to close its consulate that is located in the southern Chinese city of Chengdu.
Also appearing on the investors’ radar is the probability of more fiscal and monetary policy measures; as the road to a full-blown economic recovery remains unclear. The European Union leader earlier this week agreed to issue an unprecedented stimulus package worth around 750 billion Euros.
The Federal Reserve meets in the coming week to determine whether more accommodation is necessary. Although currently there is a need more than ever to keep governments around the world spending; the additional money being printed might push investors to increase their investment power in gold.
Executive Chairman at Evolution Mining Ltd., Jake Klein, said in an interview:
“There is good reason to believe that we will go past that record. Gold has a long way to go and prices will be strong.”
For now, most analysts expect gold to continue rising as the current coronavirus pandemic remains persistent.