The prices of gold reached a new high on Wednesday as falling bond yields and a weaker U.S. dollar boosted the demand for the safe-haven metal.
Spot gold is currently trading at $2,034.77 per ounce as of 0934 GMT.
The benchmark 10-year Treasury yield dropped to a five-month low while the five-year U.S. Treasury yield plunged to a record. The Treasury yields were partially affected by Federal Reserve Bank of San Francisco President Mary C. Daly’s comments that the American economy will need more support than initially thought. She also said the length of support needed to stimulate the economy will be longer.
The dollar index fell by 0.3% against a basket of rival currencies that made the yellow metal cheaper for investors that use other currencies. The euro jumped over 5% against the dollar, the Japanese yen has risen to 105.64 and the Australia dollar increased by 0.3%.
Meanwhile, White House negotiators vowed to work “around the clock” with congressional Democrats to finalize a deal on COVID-19 economic stimulus relief bill by the end of this week. Treasury Secretary Steven Mnuchin said it is possible because the main negotiators for the bill have already set a timeline so that the legislation can then be approved next week. However, he warned that funding is nowhere near the $3.4 trillion that the Democrats want.
Tapas Strickland, an analyst at the National Australia Bank, commented that failure to agree on the relief funding would significantly impact the American economy given that it is already losing some momentum.
On the trade front, senior U.S. and Chinese officials will review the implementation of their Phase 1 trade deal via video conference on August 15. The two sides are also likely to air mutual grievances to their increasingly tense relationship. The latest issue between the two largest economies in the world is President Donald Trump’s threat to ban the use of the Chinese-owned video app TikTok in the U.S. if it is not sold to a non-Chinese buyer.
In a related development, the holdings of SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, rose by 0.8% to 1,257.73 tons yesterday.