Spot gold price breaks the $1,800 mark, and the epidemic continues to escalate risk aversion
After gold futures broke the $1800 mark last week, spot gold also successfully reached the 1800 mark on Wednesday (8th), setting a new high since 2011. Many analysts expect the price of gold to rise further in the future, because while the new coronary pneumonia epidemic has caused global economic turmoil, investors' concerns about inflation have also increased their buying of gold.
On Wednesday, spot gold surged 1.3% to US$1818.02 per ounce, the highest since September 2011. Spot silver also touched $18.7384, the highest in more than four months. Spot gold prices have soared 40% in the past 14 months and are currently reaching a high of $1811 per ounce, which is only a difference of more than $100 from the highest record of 1920.30 per ounce set in 2011. Some analysts believe that gold is currently in a bull market, and by the end of this year, the price of gold will be expected to challenge the level of 2,000 US dollars.
The epidemic has repeatedly ignited investor risk aversion
A major factor driving the gold price surge is the economic and political uncertainty caused by the repeated rampage of the new coronavirus pneumonia and the loose monetary policies adopted by central banks in many countries .
With more than 3 million new coronavirus infections in the United States, more than 130,000 deaths. Investors are concerned that the US medical system may be overwhelmed, and the new cases of new pneumonia may cause the state government to re-impose restrictions. According to the July 8 data from Hopkins University in the United States, in the past three days, about 39 states have experienced a worrying increase in infection cases , including Florida, Texas and California have become more serious states, while These states have also adopted a new round of restrictions and forced companies to close again to curb the spread of the epidemic.
The recurrence of the epidemic also led the Fed to predict that the subsequent impact of the US economy on the epidemic may last longer than expected. The rising economic costs of the epidemic have increased investor panic and ignited the enthusiasm of the gold market.
Inflation concerns and the decline in bond yields have caused investors to flood the gold market
On the other hand, the central banks of many countries including the Federal Reserve have responded to the slowdown in economic growth and the spread of the epidemic by lowering interest rates and releasing liquidity to the market. This has lowered the real rate of return on government bonds. The yield on the 10-year U.S. Treasury bond is declining and has fallen to a 3-year low of 0.66%. This has also heightened people's concerns about inflation and made gold more attractive.
The latest data released by the World Gold Council (WGC) on July 7th showed that due to market concerns about the new outbreak of the new coronavirus pneumonia epidemic, which triggered a new round of risks and uncertainties, the investment demand for gold continued to increase. In June, the global gold ETF (Exchange Traded Fund) total volume increased by 104 tons, and there has been a net inflow for seven consecutive months. The total position reached 3621 tons and hit a record high. This year, it has increased by 655.6 tons, exceeding the growth of the whole year of 2009. the amount.
The surge in gold holdings means that investors have high hopes for the market outlook of gold. James Steel, a precious metals analyst at HSBC, believes: "Now the key points of gold have been broken, in order to hedge the risks caused by uncertainty. And continued low yields, some traders who were still on the sidelines may change their wait-and-see attitude and join the bully of gold, bringing new buying. It is expected that more funds will flow into the gold market in the future. Affected by the epidemic, Traditional gold consumer countries including China and India have seen a decline in demand for gold jewelry this year, and a large number of investors’ hedging reactions to new coronary pneumonia have brought gold ETF holdings to record levels, which even compensated for the decline in gold jewelry demand Impact."
At the same time, rising concerns about future inflation pressures are also a major factor supporting the rise in gold prices. As the end of July approaches, some of the US government’s fiscal stimulus plan, which came into effect during the epidemic, will also expire, including an additional $600 a week in unemployment benefits. Investors expect that the Fed and the US Treasury may provide more support in the future. Fed Vice Chairman Richard Clarida said on Tuesday, "The Fed has provided a very loose interest rate policy, but we can do more and will take further action, and may continue to maintain unrestricted debt purchases. The scale may also further relax policies through forward-looking guidance and maintain support for loans."
If the Fed takes further easing measures, it will further arouse market concerns about inflation pressure and stimulate gold prices to rise. Many investment banks, including Goldman Sachs, expect that the price of gold will continue to increase in the future . Goldman Sachs Group said that gold prices may reach a record $2,000 in the next 12 months. JPMorgan Chase also recommends that investors continue to hold gold to deal with inflation risks.