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Mon 27 Jul 2020 09:05 AM

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Gold hits record high of $1,944 per ounce on haven demand

The metal surged more than one percent to $1,944.71 per ounce in Asian trade, with analysts predicting it could soon break $2,000

Gold hits record high of $1,944 per ounce on haven demand

With Covid-19 showing no sign of letting up, traders have been flocking to gold, which is seen as a safe bet in times of crisis and uncertainty.

Gold soared to a record high on Monday as investors rushed into the safe-haven commodity on concerns about heightened China-US tensions, a spike in virus infections and a lack of progress on a new stimulus bill in Washington.

"Always a sign of trouble, gold continued its red hot streak on Monday, the safe haven commodity looking mighty attractive after another troubling weekend of Covid-19 and US-China headlines," said Spreadex analyst Connor Campbell.

With vast monetary easing measures put in place by the Federal Reserve also pushing the dollar lower against most other currencies, gold is flying, with the spot price hitting an all-time high of $1,944.71 per ounce, well above its previous record of $1,921.18 seen in 2011. It later pulled back somewhat.

Relations between the world's two superpowers meanwhile took another negative turn, denting investor sentiment on stock markets.

The American flag was lowered at the US consulate in Chengdu and Chinese authorities entered the building, as Beijing carried out a Cold War-style retaliatory closure of the mission.

Tete-a-tete

Relations have deteriorated in recent weeks in an intensifying standoff between Washington and Beijing, with the Chengdu mission ordered to shut in retaliation for the forced shutdown of the Chinese consulate in Houston, Texas.

"Technically, the superpowers are all-square in this specific tete-a-tete – but investors are worried about what comes next," noted Campbell.

At the same time, after months of healthy rallies across equity markets -- fuelled by trillions of dollars in government and central bank support -- traders are beginning to step back as they weigh the long-term economic impact of the coronavirus.

Eyes are on the Fed's policy meeting this week, with some predicting further measures to boost the economy -- possibly negative interest rates -- that could put more pressure on the dollar and send bullion above $2,000.

There are also concerns that a worse-than-forecast reading on second-quarter US gross domestic product could spark another dollar sell-off.

The greenback was also down against most other currencies, with the euro at its highest since September 2018.

Equities mixed

Stock markets were mixed as investors fret over the impact of the virus on the economy, with London falling and Paris flatlining.

Frankfurt however rose on a key survey showing that German business confidence rose for the third month in a row in July, as Europe's top economy bounced back from coronavirus lockdowns.

In Asia, Hong Kong, Tokyo, Singapore, Mumbai and Wellington were all in the red, while Shanghai, Sydney, Seoul and Jakarta were higher.

Investors are also growing concerned about slow progress on a new US stimulus programme.

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