Gold pierces $1,800 as virus surge dents swift recovery hopes
The precious metal pushes to a nine-year high as it breaches $1,800 for the first time since 2011.
Gold breached $1,800 an ounce on Wednesday for the first time since 2011, propelled by fears that a surge in coronavirus cases in the United States could derail a rapid economic recovery.
Spot gold rose 0.4 percent to $1,802.15 per ounce by 12:17 GMT, after hitting its highest since November 2011, at $1,804.41, earlier in the session.
US gold futures rose 0.2 percent to $1,814.10 per ounce.
Gold, which is seen as a haven asset in times of uncertainty, has been driving higher as a spike in US COVID-19 cases dents hopes of a swift economic rebound after lockdown restrictions shut down or severely curtailed entire sectors of the US and global economies.
“Investors are hedging their exposure to riskier assets simply because there’s a growing and widening belief that any recovery is unlikely to be V-shaped,” said Michael Hewson, chief market analyst at CMC Markets UK.
“Markets generally tend to operate through a prism of optimism, and that optimism is being tested at the moment and gold is benefiting from that.”
Confirmed cases of COVID-19 infections in the US are quickly closing in on three million, according to Johns Hopkins University.
As the virus swells in parts of the world’s largest economy, cities and states have either postponed or rolled back the lifting of lockdown restrictions.
On Sunday, economists at Goldman Sachs lowered their forecasts for third-quarter US economic growth, citing economic reopenings being put on hold across the country.
Adding to the economic worries, Federal Reserve officials expressed concern that the surge in infections threatens to curtail consumer spending- which accounts for roughly two-thirds of US economic growth – and hamper the jobs market recovery.
The European Commission also forecast the eurozone would drop deeper into recession this year.
However, in the medium to longer-term, an improvement in the economic backdrop could weigh on gold, Julius Baer analyst Carsten Menke said in a note, pointing out that safe-haven demand has been the strongest in countries hit the hardest, such as the US and the UK.
Mirroring appeal for the metal, prices of which have rallied nearly 19 percent so far this year, gold-backed exchange-traded funds added 104 tonnes of bullion worth $5.6bn in June, the World Gold Council said on Tuesday.
“The health, financial and economic uncertainties generated by the COVID-19 pandemic and its aftermath are likely to continue to support gold’s rally well into 2021, but at a reduced level,” HSBC analysts said in a note.
Investors also piled into other precious metals on Wednesday. Palladium rose 0.5 percent to $1,925.30 per ounce, platinum also gained 0.1 percent to $836.35 per ounce and silver rose 0.7 percent to $18.42 per ounce.