Gold surges close to the $2,000 level

Image: REUTERS/ LEONHARD FOEGER

Gold jumped more than 1.5% to hit a record and marched towards the $2,000 level on Tuesday, boosted by a weaker dollar and expectations of a long, dovish stance from the US Federal Reserve as economic pain from the Covid-19 pandemic grows.

By 2.55am GMT, spot gold was up 1.4% at $1,969.76 an ounce after scaling a fresh peak of $1,980.57 in early Asian trade. US gold futures climbed 1.7% to $1,963.30. Silver also surged, rising as much as 6.4% to $26.19 an ounce, its highest since April 2013.

One of the factors for gold’s run is the weakening of the dollar ahead of the Fed meeting, which is expected to reiterate an “accommodative” stance, said Michael McCarthy, chief strategist at CMC Markets.

“We’ve got increasing global worries, particularly in US-China relations, but also further outbreaks tampering economic recovery, and then highly liquid environment, so the precious metals are making sense to a lot of investors.”

The dollar index held near a two-year low as investors worried about the damage from the novel coronavirus to the US economy and awaited the passage of a new fiscal rescue package.

Bullion’s gains also came despite an uptick in equities as investors focus on the Fed’s two-day policy meeting ending on Wednesday.

The meeting is expected to discuss implementing dovish forward guidance which gold investors would consider supportive as real yields, the key driver of gold, would be expected to remain at record lows, Phillip Futures analysts said in a note. Lower bond yields reduce the opportunity cost of holding non-interest bearing gold.

Gold’s safe-haven appeal was also lifted on deteriorating US-China ties and dimming hopes of a quick economic recovery as the virus showed no signs of slowing.

Platinum rose 0.5% to $950.13 and palladium gained 0.9% to $2,331.76. — Reuters


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