Gold nears all-time high as growth concerns buoy haven demand

Jack Vearey/ Getty

Gold traded near $1 900 an ounce, edging closer to its all-time high set almost nine years ago, as concerns about global growth buoyed haven demand.

Increasing signs that the prolonged coronavirus pandemic is stalling an economic recovery and the recent surge in tensions between the US and China are underpinning demand for the metal. Bullion is heading for a seventh weekly gain, the longest stretch since 2011, while silver is poised for its biggest weekly advance in about four decades.

Negative real rates, a weaker dollar, concerns over the economic cost of the health crisis and geopolitical uncertainties have put both precious metals on track for their biggest annual gain in a decade. UBS Group AG raised its near-term forecast for gold to reach $2 000 an ounce by the end of September, citing its qualities as a diversifier in a low-rate world.

“When interest rates are zero or near zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold and you see the gold price will rise as uncertainty in the markets are rising,” Mark Mobius, co-founder at Mobius Capital Partners, said in a Bloomberg TV interview. “I would be buying now and continue to buy, because gold is really on a run, it’s doing well.”

Spot gold declined 0.2% to $1 884 an ounce at 1:40 p.m. in Singapore. Prices touched $1 898.34 on Thursday, nearing the record $1 921.17 hit in September 2011. Spot silver was steady at $22.6022 an ounce, and is poised for the biggest weekly advance since 1980.

While spot gold prices are about $40 away from the all-time high, some futures contracts on the Comex are already trading even higher. December, which overtook August as the contract with the highest open interest according to data released when Friday’s Asian trading session was already underway, touched $1,927.10 an ounce Thursday. That’s above the record for the most-active contract of $1,923.70 reached in September 2011.

US, China, order closures of consulates 

On the geopolitical front, Secretary of State Michael Pompeo cast China’s leaders as tyrants bent on global hegemony. His comments came after the US unexpectedly ordered China to close its consulate in Houston within 72 hours, following what it said were years of espionage directed from the diplomatic compound against US commercial and national security assets. China has rejected the accusations and on Friday, ordered the US to close its consulate in the southern Chinese city of Chengdu.

Also on investors’ radars is the prospect for further fiscal and monetary policy measures as the path to economic recovery remains uncertain. European Union leaders this week agreed on an unprecedented stimulus package worth 750 billion euros, while the Federal Reserve meets next week to decide if further accommodation is needed.

While there’s more need than ever to keep governments spending, the extra money being printed will likely prompt investors to increase their gold exposure, Jake Klein, executive chairperson at Evolution Mining Ltd., said in a Bloomberg TV interview.

“There is good reason to believe that we will go past that record,” Klein said, referring to prices. “Gold has a long way to go and prices will be strong.”

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