Gold price long­est win­ning streak 2011

Fiji Sun - - BUSINESS -

Gold was clos­ing in on a record high climb­ing above $1900 (FJ$ 4,055.99) a troy ounce as geopo­lit­i­cal ten­sions kept the haven metal on its long­est win­ning streak since 2011.

The com­mod­ity, used by in­vestors as a store of value in times of stress, has ral­lied strongly as other safe as­sets have be­come less at­trac­tive, strate­gists say. The US dol­lar has weak­ened in re­cent weeks as Amer­ica’s COVID-19 cri­sis deep­ens, while the in­fla­tion-ad­justed yields avail­able on bench­mark gov­ern­ment bonds have slumped well below zero.

Gold rose as much as $19 (FJ$ 40.55) ito a high of nearly $1906 (FJ$ 4,068.90) an ounce, keep­ing it on course for a sev­enth straight weekly gain, as a deep­en­ing diplo­matic row fed ten­sions be­tween Wash­ing­ton and Bei­jing.

Record in­tra­day high

The metal is now ap­proach­ing its record in­tra­day high of $1921 (FJ$4,100.92) set in Septem­ber 2011, hav­ing risen about a quar­ter this year — mak­ing it one of the best-per­form­ing as­sets in 2020.

“Financial mar­kets tend to move like a gi­ant pen­du­lum, and once it swings it is very hard to stop it.

“That’s def­i­nitely the case in gold,” said Peter Grosskopf, chief ex­ec­u­tive of Sprott, a pre­cious met­als spe­cial­ist with $12bn (FJ$ 25.6175bn) un­der man­age­ment.

“The lat­est move is be­ing driven by the COVID-19 out­breaks we are see­ing in the US, and the re­al­i­sa­tion that the re­cov­ery is go­ing to be longer and harder than many peo­ple were ex­pect­ing a few weeks ago,” said Joe Foster, fund man­ager at VanEck in New York.

“The US dol­lar is also weak and sil­ver has bro­ken out, so that prob­a­bly tells you some spec­u­la­tive money has come into the mar­ket.”

Sil­ver, which hit a seven-year high above $23 (FJ$ 49.10) an ounce, is head­ing for its big­gest weekly gain in decades.

Gold’s strong run has also tur­bocharged the share-price per­for­mance of big pro­duc­ers, which en­joy bumper prof­its when prices rise be­cause there is no ac­com­pa­ny­ing in­crease in costs.

The NYSE Arca Gold Bugs in­dex is up al­most 37 per cent so far in 2020.

Huge mone­tary sup­port

Gov­ern­ments and cen­tral banks across the world have un­leashed huge fis­cal and mone­tary sup­port to dull the eco­nomic blow of the pan­demic.

This has driven down yields on safe gov­ern­ment bonds, with some US Trea­suries pay­ing in­vestors a neg­a­tive re­turn once in­fla­tion is taken into ac­count.

“Clients are quite con­cerned about the un­prece­dented need for fis­cal and mone­tary as­sis­tance,” said Mr Grosskopf. In­vestors have stashed a record $40bn (FJ$ 85.36bn) of cash in gold-backed ex­change traded funds dur­ing the first half of the year, ac­cord­ing to the World Gold Coun­cil.

Keep com­ing

Mr Foster said he ex­pected the in­flows to keep com­ing.

“I have never seen a set-up so good for gold as it is right now. I ex­pect it to test $2000 (FJ$ 4,268.08) later this year,” he said.

“There are sce­nar­ios that could take gold to dou­ble that in the next sev­eral years,” he added, point­ing to the po­ten­tially in­fla­tion­ary ef­fects of the tril­lions of dol­lars of COVID-19 stim­u­lus mea­sures.

Bank of Amer­ica said in­vestors were look­ing to hedge this in­fla­tion­ary risk by “crowd­ing” into bets on a fall­ing US dol­lar and a ris­ing gold price. The bank’s chief in­vest­ment strate­gist Michael Hart­nett said the de­base­ment of the dol­lar had emerged as a key theme for big fund man­agers as the US econ­omy strug­gled with ex­cess debt, in­suf­fi­cient growth and maxed­out mone­tary and fis­cal stim­u­lus.

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