Gold continued its rally amid global pandemic uncertainty, with prices hitting new records to start the week. The price of metal for immediate delivery closed in on $2,000 an ounce.
Spot gold rose as much as 0.6 percent on Monday to $1,988.40 an ounce, while most-active futures traded as high as $2,009.50 on the Comex. Bullion had its biggest monthly gain since 2012, soaring 11 percent in June as investors weighed a weaker dollar and record-low US real yields.
“The fall in US 10-year real yields was the most important driver in our view, given the strong inverse relationship,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia, cited by Bloomberg. “Safe-haven demand primarily reflected global growth concerns linked to rising Covid‑19 cases around the world and escalating US‑China tensions.”
Global Covid-19 cases have now surpassed 18 million, with the pandemic seeing a million new infections every four days.
According to analysts, US fiscal negotiations will be playing a key role in gold’s rally. Its price will be dependent on the extent of the fiscal stimulus agreed to, RJO Futures senior commodities broker Daniel Pavilonis told Kitco News.
“It will depend on how much stimulus is passed. If they start to wind down the stimulus, then there is a real possibility that gold softens a bit. If they ramp it up and continue to print up money, then gold should move higher,” he said.
A weaker US dollar was pushing gold prices to new all-time highs last week, and if this trend continues, it could see more gains going forward, experts say.
“Gold prices again tested new highs and, while real yields remain the key driver, the correlation with the USD has strengthened … The USD testing two-year lows has propelled prices to new highs,” said Standard Chartered precious metals analyst Suki Cooper. “It bodes well for gold, that we expect the USD to weaken and expect real rates to remain negative.”
ING head of commodities strategy Warren Patterson is also projecting a weaker US dollar for the rest of the year. “This is one factor which shouldn’t provide too much resistance to potentially higher prices,” he wrote last week.