Gold hits record high on haven demand

Gold hits record high on haven demand

Bullion has soared on demand for safe havens as traders fret over the global outlook and the dollar weakens. (AFP photo)
Bullion has soared on demand for safe havens as traders fret over the global outlook and the dollar weakens. (AFP photo)

HONG KONG: Gold hit a record high Monday as investors rushed into the safe-haven on concerns about China-US tensions, a spike in virus infections around the world and a lack of progress on a new stimulus bill in Washington.

After months of healthy rallies across equity markets, fuelled by trillions of dollars in government and central bank support, traders are beginning to step back as they weigh the long-term economic impact of the coronavirus.

With vast monetary easing measures put in place by the Federal Reserve pushing the dollar lower against most other currencies, gold is flying, hitting an all-time high of US$1,944.71, well above its previous record of $1,921.18 seen in 2011.

Eyes are on the Fed's next policy meeting this week, with some predicting further measures to boost the economy — possibly negative interest rates — that could put more pressure on the dollar and send bullion above $2,000.

There are also concerns that a worse-than-forecast reading on second-quarter US gross domestic product could spark another dollar sell-off.

While the weak dollar has been a key catalyst for the metal's advance, gold has also been boosted by its attractiveness as a haven in times of turmoil with China-US relations souring by the day.

"Strong gains are inevitable as we enter a period much like the post-global financial crisis environment, where gold prices soared to record levels as a result of copious amounts of Fed money being pumped into the financial system," said Gavin Wendt, senior resource analyst at MineLife.

The greenback was down against most other currencies, with the euro at its highest since September 2018, while higher-yielding units such as the South Korean won and Indonesian rupiah were also up.

Stock markets were mostly up but with little conviction as investors fret over the impact of the virus on the economy.

Shanghai was slightly higher, having suffered big losses last week as China and the US closed consulates in Chengdu and Houston, ramping up tensions between the superpowers.

Sydney was up 0.2%, while Singapore and Jakarta each added 0.3%, though Seoul climbed more than 1% and Taipei jumped more than 2%.

Tokyo, Hong Kong and Mumbai drifted lower.

Investors are growing concerned about lawmakers' slow progress on a new US stimulus programme, with Republicans still to present their proposals worth around $1 trillion, which is less than a third of the plan set out by Democrats.

There are concerns an agreement could take some time, hitting millions of Americans whose much-needed extra unemployment benefits are about to come to an end.

Key figures around 0400 GMT

Gold: UP 2.2% at $1,944.71 per ounce

Tokyo - Nikkei 225: DOWN 0.3% at 22,685.31

Hong Kong - Hang Seng: DOWN 0.1% at 24,683.66 (break)

Shanghai - Composite: UP 0.1% at 3,199.67 (break)

Euro/dollar: UP at $1.1715 from $1.1652 at 2100 GMT

Dollar/yen: DOWN at 105.56 yen from 105.95 yen

Pound/dollar: UP at $1.2848 from $1.2791

Euro/pound: UP at 91.13 pence from 91.07 pence

West Texas Intermediate: DOWN 0.3% at $41.15 per barrel

Brent North Sea crude: DOWN 0.4% at $43.15 per barrel

New York - Dow: DOWN 0.7% at 26,469.89 (close)

London - FTSE 100: DOWN 1.4% at 6,123.82 (close)

Do you like the content of this article?
COMMENT (3)