What’s happening: Gold prices rushed past $1,940 to set a record high on Monday and seems to be on course to breaching the $2,000 level.
What happened: Rising covid-19 cases globally, flaring tensions between the US and China and inflation fears had investors scurrying for safe-haven options, triggering a rally in precious metals.
While gold has risen steadily since mid-June, the yellow metal has maintained a steep upturn for more than a week now. Gold futures jumped to an all-time high of $1,941.90 per ounce on Monday and have gained more than 7% in July. Despite the rally, some analysts believe gold can breach $2,000 soon.
Why it matters: The persistent rise in infections benefitted gold prices. Investors continued to worry about the surge in covid-19 cases in the southern states of the US. The resurgence of cases in Spain triggered fears of the second wave of infections swelling in Europe. Although governments seem hesitant to impose widespread lockdowns again, a second wave could cripple an already battered global economy.
Sentiments remained strained, as the US flag was lowered at the consulate in Chinese city of Chengdu, after Washington ordered Beijing to close the consulate in Houston last week.
While investors added more safe-haven options to their portfolios, amid economic and geopolitical uncertainties, inflation fears kept the greenback under pressure. The US dollar continued its downward momentum on Monday, plunging towards its lowest level since 2018. The ICE US dollar index, which measures the currency’s performance versus a basket of major currencies, declined 0.9% to 93.64, after losing almost 4% since the beginning of July.
As investors brace for higher inflation amid expectations of additional government stimulus, analysts widely expect gold prices to continue to find favour and breach the $2,000 mark. Inflation erodes Treasury yields, which exerts pressure on the US dollar and backs gold buying.
Gold futures for August delivery added $33.50, or 1.8%, to close at $1,931 an ounce on Monday, after reaching a record intraday high of $1,941.90. The settlement surpassed the earlier record of $1,897.50 an ounce set on Friday.
The yellow metal had climbed 4.8% last week to record its highest weekly percentage gain since April.
In other metals, September silver also spiked 7.2% to close at $24.501 an ounce on Monday, recording its highest settlement since August 2013. September copper rose 0.2% to $2.8975 a pound, while October platinum climbed 1.1% to $966.60 an ounce.
What to watch: As investors await the US FOMC (Federal Open Market Committee) to make an announcement regarding its monetary policy on Wednesday, gold could find support this week. Given the elevated gold prices and the steep climb over the past few days, some profit taking can be expected, although this does not seem to be the case yet. Gold futures traded higher by 1.9% to $1,967.90 an ounce during the Asian session today.