Gold hits historic high of $1,943 per ounce on Monday; next stop $2,000?
US-China tensions, enduring fears about the impact of Covid have provided plenty of fuel for this surge.
In what appears to be an unstoppable rally, gold on Monday hit an all-time high of $1,943 an ounce, far outstripping the previous high of $1,920.30 reached in September 2011 to post a unprecedented 37 per cent jump in 12 months as rising geopolitical tensions and a weaker dollar continue to push investors towards safe-haven assets, making a highly bullish $2,000 price level well-nigh possible.
"Gold is trading at $1,943 per ounce in global markets and has appreciated 37 per cent in a year's time, outperforming all other assets," said Shamlal Ahamed, managing director, International Operations, Malabar Gold and Diamonds.
"It is a historic day for gold and all those individuals and institutions that have ever purchased gold as their investments have turned highly profitable with gold rate crossing its previous historic rate of $1,920 per ounce," said Ahamed.
On London Metal Exchange, spot gold rose 1.79 per cent to $1,938.80 per ounce on Monday before dropping to $1935 per ounce, far surpassing the previous high of $1,920.30 recorded in September 2011.
Although the record has been a significant target for analysts and investors, it is also seen by some as just a small speed bump within a much bigger uptrend. Marc Chandler, chief market strategist at Bannockburn Global Forex, said that he expects that gold prices could easily hit $2,000 an ounce before this current rally is over.
"It is difficult to talk about resistance in never-before-seen prices, but if our view of interest rates and the turn in the dollar cycle is fair, then $2,500 might not seem unreasonable," he said in a report.
Steven Dunn, head of exchange-traded products at Aberdeen Standard Investments, said that while gold's rise above $1,900 an ounce has been dramatic, it is not surprising.
"The combination of escalating US-China tensions and enduring fears about the economic impact of the coronavirus pandemic have provided plenty of fuel for this surge, and neither seem likely to dissipate in the near term," he said in a statement to Kitco News. "As investors continue to face volatility and uncertainty, the appeal of safe-haven assets like gold and silver will only increase."
The market has seen significant bullish momentum in the last few months as the global economy has been turned upside down because of the Covid-19 pandemic.
Top officials to US President Donald Trump said on Sunday they agreed in principle with Senate Republicans on a $1 trillion coronavirus relief package. Last week European Union leaders had agreed on a massive stimulus of over $850 billion. Non-yielding gold typically benefits from low interest regime.
The yellow metal is also helped by aggressive monetary easing adopted by many central banks around the world since the pandemic plunged the global economy into a recession. Some investors worry that such an unprecedented level of money-printing could eventually lead to inflation.
The dollar index fell 0.5 per cent on Monday to a multi-year low against its key rivals, making gold less expensive for holder of other currencies.
Tensions have soared between China and US on a range of fronts including trade, China's handling of the novel coronavirus and a tough new security law for Hong Kong, with US officials warning of a "new tyranny" from China.
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