The prices of gold rose by more than 1% on Wednesday to reach its highest level since September 2011. The bullion was lifted by a weaker U.S. dollar which dropped close to a four-month low and made the yellow metal less expensive for investors using other currencies. It was also pushed up by the investors’ expectation of more stimulus from central banks to cushion their economies against the impact of the COVID-19 pandemic.
Central banks around the world have reduced interest rates and released a series of stimulus measures. These measures helped raise the demand for gold as it is used as an inflation hedge and pushed prices up by more than 22% for far in 2020.
Spot gold is currently trading at $1,852.74 per ounce as of 0803 GMT.
According to ANZ analyst Daniel Hynes, the stimulus packages have led back investors to non-yielding and safe-haven assets like gold. He also said the weakness of the greenback and the possibility of low interest rates for the foreseeable future have boosted investors’ appetite for the precious metal.
The coronavirus crisis continues to worsen and impact economies around the world. In Japan, factory activity declined for the 15th consecutive month in July. In the U.S., congressional Democrats and White House officials are working on another round of stimulus measures that would include more money for schools and extended unemployment insurance. In the European Union, leaders have finally agreed on a historic 750-billion-euro coronavirus stimulus package.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust went up by 0.7% yesterday to 1,219.75 tons.
Also, despite the upward trend in the prices of gold, it has been outperformed by silver this month. According to the Economic Intelligence Unit’s global economist Cailin Birch, silver has risen by 4.7% to $22.33 an ounce, its highest price in almost seven years. She said the price surge is due to optimism for the growth of the industrial sector. Birch expects the demand for both gold and silver to remain strong for the rest of the year.