Gold Soars to Record Highs as the Dollar and Real Rates Decline

Gold Bar

The prices of gold jumped to an all-time high on Monday as the tension between the U.S. and China intensified. The conflict between the two largest economies reinforced expectations that central banks would release more stimulus to shield their economies from the impact of the COVID-19 pandemic. It also sent the U.S. dollar down by 0.4% against a basket of rival currencies, which is lowest level for the greenback in almost two years.

Spot gold is currently trading at $1,942.54 per ounce as of 0959 GMT.

ED&F Man Capital Markets’ analyst Edward Meir noted a lot of investments are moving into gold because of the substantially weaker dollar. He also said that the precious metal will remain in an upward trend as long as the COVID-19 continues. OANDA’s senior market analyst Jeffrey Halley added that the bullion is likely to gain more momentum on technical buying and as investors take out stop-loss orders. He also expects gold to rise quickly to the $2,000/oz level compared to the rise from  $1,800 to $1,900.

Last week, the U.S. ordered the closure of China’s consulate in Houston. U.S. Secretary of State Mike Pompeo said that the consulate was being used for spying and intellectual property theft. He also called on the U.S. government and its allies to press China to change its ways. In a like-for-like response, Beijing ordered the closure of the American consulate in Chengdu.

Meanwhile, the coronavirus outbreak continues to worsen. According to a Reuters’ tally, the virus has already infected more than 16.13 million and killed 644,836. This elevated concerns that the global economy would plunge into a recession and forced central banks to implement aggressive monetary easing. It also forced the U.S. to issue another round of coronavirus relief bill. This benefited gold since it is widely used as a hedge against currency debasement and inflation.

In a related development, the U.S. Commodity Futures Trading Commission reported that market speculators raised their bullish stance in COMEX gold contracts for the week that ended on July 21. In physical trading, the prices of the yellow metal in India slipped as local prices surged. The same thing happened in China because of weak retail demand.

 

Source – Gold soars to all-time high as dollar dive adds fuel to record run