Bullion has soared on demand for safe havens as traders fret over the global outlook and the dollar weakens Photo: AFP
business

Gold hits record high on haven demand as markets rally sputters

15 Comments
By JOEL SAGET

Gold hit a record high Monday as investors rushed into the safe-haven on concerns about China-U.S. tensions, a spike in virus infections around the world and a lack of progress on a new stimulus bill in Washington.

After months of healthy rallies across equity markets, fueled 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.

With vast monetary easing measures put in place by the Federal Reserve pushing the dollar lower against most other currencies, gold is flying, hitting an all-time high of $1,944.71, well above its previous record of $1,921.18 seen in 2011.

Eyes are on the Fed's next 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 U.S. gross domestic product could spark another dollar sell-off.

While the weak dollar has been a key catalyst for the metal's advance, gold has also been boosted by its attractiveness as a haven in times of turmoil with China-U.S. relations souring by the day.

"Strong gains are inevitable as we enter a period much like the post-global financial crisis environment, where gold prices soared to record levels as a result of copious amounts of Fed money being pumped into the financial system," said Gavin Wendt, senior resource analyst at MineLife.

The greenback was down against most other currencies, with the euro at its highest since September 2018, while higher-yielding units such as the South Korean won and Indonesian rupiah were also up.

Stock markets were mostly up but with little conviction as investors fret over the impact of the virus on the economy.

Shanghai was slightly higher, having suffered big losses last week as China and the U.S. closed consulates in Chengdu and Houston, ramping up tensions between the superpowers.

Sydney was up 0.2 percent, while Singapore and Jakarta each added 0.3 percent, though Seoul climbed more than one percent and Taipei jumped more than two percent.

Tokyo, Hong Kong and Mumbai drifted lower.

Investors are growing concerned about lawmakers' slow progress on a new U.S. stimulus program, with Republicans still to present their proposals worth around $1 trillion, which is less than a third of the plan set out by Democrats.

There are concerns an agreement could take some time, hitting millions of Americans whose much-needed extra unemployment benefits are about to come to an end.

© 2020 AFP

©2020 GPlusMedia Inc.

15 Comments
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Well we knew the waterfall was coming. Hold on and pray!

2 ( +2 / -0 )

Although the Great Depression technically started with the Wall Street crash of October 1929, it wasn't really brought home to most folks until about a year or so later when the huge job losses started. I fear we are approaching that stage, certainly this autumn/winter. Start growing your own food, and Buddy, can you spare a dime?

0 ( +0 / -0 )

Nice. I’ll try visit the gold bank in between my trip to Lawson 100 today and the laundromat.

0 ( +1 / -1 )

Yes, yes please keep dreaming that economy can recover from Corona. Everyone who thinks so is delusional.

There is no much time left to get yourself into Gold or Digital gold BTC before economy collapse and your savings will be gone with inflation.

-2 ( +0 / -2 )

Anyone that follows me knows that I have suggested more than a few times to buy gold.

The time to buy gold is not when it is news but when it is NOT news.

People looking to secure their wealth against inflation should look at silver.

0 ( +1 / -1 )

We are in the early part of global financial meltdown, but we are too poor that we can't feel it or see it yet unless you start taking a much closer look at what is closing, what is not being stocked on shelves and longer lines less cash flow and dropping reds on the exchange markets. hmmm. All I can say is I bought silver at $4.00 an ounce today its a $24.00 that is six times my initial investment. It might not be gold but it made more growth than gold in value over the spread. Gold may have tripled but it cost more out of pocket to buy it. With silver i had extra in my pocket to invest in other goods.

1 ( +1 / -0 )

Yes, yes please keep dreaming that economy can recover from Corona. Everyone who thinks so is delusional.

It was delusional to think that the economy could recover before Covid19 appeared. Now, they have an excuse: Corona.

0 ( +0 / -0 )

I’m definitely holding on and on....

0 ( +0 / -0 )

We are in the early part of global financial meltdown,

An economic meltdown would be a lot more likely. The banks are quite a bit stronger now compared to 2008, thanks to tougher govt regulation. They would fold after the real economy does. A reverse from before.

0 ( +0 / -0 )

All I can say is I bought silver at $4.00 an ounce today its a $24.00 that is six times my initial investment.

The last time silver was that cheap was 2002-2003 or so.

You held it that long, even through 2011-2013 when it averaged $30-$40, hitting a high of $48?

It might not be gold but it made more growth than gold in value over the spread. Gold may have tripled but it cost more out of pocket to buy it. With silver i had extra in my pocket to invest in other goods.

In 2002 - 3 gold was about $300, as low as $280... making it now 6+ times more valuable.

0 ( +0 / -0 )

The country with the most gold reserves wins!

-1 ( +0 / -1 )

As a currency, specie (gold or silver) has not worked since the middle ages. For one thing it has uses other than as a currency. The instant a gold coin has a use that is more highly valued than the face value of the coin it is melted down and used elsewhere. This was certainly true in the US before the Civil War where the US was on a bimetallic standard. Silver coins essentially disappeared from circulation and the Treasury had to mint coins with silver content less than their face value so they wouldn't be melted down. Specie coins are also prone to being shaved discretely to accumulate precious metals for trade. This is why coins had serrated edges. Second, they do not prevent inflation. The Spanish created a huge inflation in the 1600s when they brought tons of gold from the New World to Europe and began circulating it as currency. The output of their primitive economy, unchanged for the most part for centuries, could not grow as fast as the money supply was growing. The result was massive inflation. Third, if one relies on a strict gold or silver standard, GDP can only grow as fast as the supply of specie. That last problem has been the downfall of attempts to rely on a gold or silver standard since the industrial revolution. How do banks make loans? In the old days it was an entry into a paper ledger, a passbook handed to the customer with the amount of funds written inside (anyone old enough to remember passbook accounts? I had a few) and oh by the way that entry into a paper ledger was money. Money out of nowhere. The bank maybe had to have 4% of that loan on deposit in some form but the rest is money out of thin air. And not incidentally it is paper money that is loaned, not specie. That is still the case today when a bank makes a loan. But without those loans, businesses cannot conduct business. Those loans fund business expansions that generate new economic activity and produce more goods and services. Forcing an economy to strictly rely on a gold standard, or silver, or both, restricts growth and has never since the beginning of the industrial revolution lasted. Also keep in mind this nation was on a gold standard from 1879 through 1933 over which time there were multiple depressions, one about every twenty years, and finally the Great Depression.

1 ( +1 / -0 )

Gold and silver have one more shortcoming as a currency. They fluctuate in value greatly. Imagine if the revenue your business has available to pay bills, pay employees and plan for the future changed value up and down every day with huge swings such as one sees with the market value of gold and silver. That is one of the great problems of having a specie based currency. A well managed paper currency is preferable. There are good reasons the worlds economies long ago ditched gold or silver standards for their currencies.

0 ( +0 / -0 )

Gold and silver have one more shortcoming as a currency. 

You forgot that they don't pay interest or dividends, and you often have pay someone else to store it and keep it secure for you.

0 ( +0 / -0 )

A well managed paper currency is preferable.

Hypothetical? Are there any?

:)

You forgot that they don't pay interest or dividends

That’s something I might like of an investment rather than a currency, but it’s ok so long as the relative value goes up.

Agree on the storage cost issue though.

0 ( +0 / -0 )

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