Gold nears eight-year high as second coronavirus wave fears grow
Gold prices have climbed to their highest level in nearly eight years as investors flock to the safe-haven asset in the face of a second coronavirus wave.
Spot gold is up 0.3 per cent at $1,771.75 per ounce as at 9.15am, after touching 1,773, its highest level since October 2012.
US gold futures are up 0.38 per cent to $1,788.60.
“Gold is a clear winner from the pandemic,” says Neil Wilson, chief market analyst at Markets.com. Gold was initially sold off at the start of the pandemic as investors scrambled for cash.
“Since then gold has made substantial progress in tandem with risk assets since the March lows because of central bank action to keep a lid on bond yields. The combination of negative real yields and the prospect of an inflation surge due to massively increased money supply is sending prices higher,” adds Wilson.
Central banks have taken aggressive stimulus measures and kept interest rates low. It has helped gold prices surge more than 16 per cent this year as the safe-haven asset is considered a good hedge against inflation.
“The major driver behind the gold rush is fear – fear of a seeing a burst in the actual risk bubble,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
A report released by Invesco today indicates the extent to which investors are shifting towards safe haven assets. A record $15.4bn in gold was purchased by exchange traded funds (ETFs) and similar products in the first quarter.
Demand via exchange-traded products increased by over 300 per cent year-on-year.
Due to a relatively soft fourth quarter last year when appetite waned, demand for gold from these products increased by around 1,000 per cent quarter-on-quarter.