Pure gold ore is shown on the stone floor of a mine. Picture: 123RF/PHAWAT KHOMMAI
Pure gold ore is shown on the stone floor of a mine. Picture: 123RF/PHAWAT KHOMMAI

London — Gold extended its rally above the key $2,000/oz level on Wednesday, hitting a record high as a weakening dollar and falling returns on US bonds added fuel to a buying spree among investors looking for a safe store of value.

With the coronavirus pandemic roiling markets, gold has now surged 34.5% in 2020 and is one of 2020’s best-performing assets.

After breaking above $2,000/oz for the first time on Tuesday and hitting a new high of $2,041.33/oz earlier on Wednesday, spot gold was up 1.1% at $2,040.50/oz by 10.20am GMT.

US gold futures climbed 1.8% to $2,056.30.

“There’s a level of fear in the markets which is almost palpable,” said independent analyst Ross Norman. “Momentum is feeding on itself, based upon real concerns about the failure of the macro economy to show any meaningful signs of recovery.”

Silver prices also surged, jumping 3.2% to $26.84, the highest since April 2013. Silver, which is both a safe-haven asset and widely used in industry, has now risen 50% in 2020, outperforming even gold.

Investors fear that economic stimulus unleashed in response to the coronavirus pandemic will trigger inflation, devaluing other assets, and keep bond yields historically low, enhancing the appeal of nonyielding gold.

Inflation-adjusted US 10-year yields have fallen from 0.15% to below -1% in 2020.

As the coronavirus has now infected more than 18-million people worldwide and the outlook for the global economy remains cloudy, many analysts think gold will rally further, with Bank of America saying it could reach $3,000 over the next 18 months.

The dollar has weakened to multiyear lows and fell again on Wednesday as Washington remained deadlocked over a relief package.

The rally remains vulnerable to pullbacks, said Carsten Menke, an analyst at Julius Baer.

“It's clear for us that the insurance gold provides to an investor’s portfolio has become very expensive and that the market at current levels is suited for short-term traders rather than safe-haven seekers.”

Technical analysts also warn that gold needs a period of consolidation.

Elsewhere, platinum rose 1.4% to $950.29/oz and palladium was 0.6% higher at $2,151.02/oz.


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