Gold Price Blasts Through $2000 to Mark Fresh Record High

Daniel Fowler
August 5, 2020

Gold prices soared past the key US$2,000 mark for the first time in history on Tuesday (Aug 4), as the ultra-low interest rate environment and hopes for more U.S. stimulus to safeguard the coronavirus-hit economy enhanced the safe-haven metal's appeal.

U.S. gold futures rose 0.4 per cent to $1,993.20. Spot silver declined 0.2 percent to $24.3345 an ounce after surging 34 percent in July.

The coronavirus pandemic prompted unprecedented amounts of stimulus to shore up economies, such as decreased premiums, which are a boon for non-curiosity-yielding gold.

"We have definitely seen a loss of momentum over the past several sessions where only modest, even marginal new highs are being made, which has likely driven shorter-term players to take some profit and trade it, rather than simply holding long positions", Tai Wong, head of metals derivatives trading at BMO Capital Markets, told Bloomberg.

In line with the trend in gold futures, the September contract of silver on the MCX also touched a high of Rs 65,951 per kilogram.

"Safe haven demand primarily reflected global growth concerns linked to rising Covid-19 cases around the world and escalating US-China tensions".

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United States gold futures rose 1.4% to hit an all-time high of $2,014.20 while spot gold rose to a record $1994.86 per ounce.

Gold tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement.

"Safe-haven buying has propelled gold prices to breach US$2,000 for the first time as the U.S. dollar tested lows last seen over two years ago, negative real rates fell to levels last seen in 2013 and expectations for further stimulus packages continue to build", said Standard Chartered analyst Suki Cooper. Investors are so anxious about the global outlook that worldwide holdings in gold-backed ETFs now stand behind only the official US reserves of bullion after they surpassed Germany's holdings.

Prices of other precious metals, including silver, have also risen sharply since the start of this year.

"Gold continues to be supported by safe haven buying amid increasing challenges to global economy in form of rising virus cases and increased US-China tensions".

White House Chief of Staff Mark Meadows said on Sunday he was not optimistic on near-term deal for coronavirus relief bill.

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