On Monday, July 27, world gold prices showed a record increase in international trading. In the middle of the day, the price of the precious metal grew by almost 2% and for the first time over the entire observation period exceeded $ 1940 per troy ounce. This is evidenced by data from the Comex Commodity Exchange.
Note that the previous historical price record was set back in September 2011. Then gold quotes reached $ 1911 per troy ounce.
In many respects, the observed rise in the price of precious metals is associated with the accelerated spread of coronavirus infection in many countries. This was told to RT by the head of the information and analytical center "Alpari" Alexander Razuvaev. According to him, traditionally, during the growing uncertainty in the global economy, investors begin to actively buy gold as a reliable means of saving money.
“In a period of instability, investors use precious metals as their main protective asset: since the beginning of the year, gold has risen in price by 25%. Now market participants are worried about the possible start of a second wave of the virus and the renewal of restrictions. A new phase of a pandemic in the absence of a vaccine can exacerbate an already difficult situation in the global economy, ”the expert explained.
According to Johns Hopkins University, since the beginning of July, the number of COVID-19 cases in the world has increased by almost 6 million and is currently approaching 16.5 million. According to the latest estimate of the International Monetary Fund (IMF), as a result of the consequences of the pandemic in 2020, the volume global GDP may shrink by 4.9%.
Against this background, world governments are actively allocating funds to support national economies. As an analyst at Freedom Finance Investment Company Yevgeny Mironyuk told RT, in the spring the G20 countries have already announced fiscal stimulus programs totaling $ 10.3 trillion. The members of the European Union agreed to create an anti-crisis fund in the amount of € 750 billion, and the United States intends to allocate about $ 6 trillion for this purpose.
“As a result of the adoption of stimulating measures, the world debt will reach 101.5% of global GDP for the first time in history. The printing press policy, which most countries have included, can lead to a rise in global inflation and therefore forces investors to look for more secure assets. Gold with its two thousand years of history is quite suitable for this role, ”Mironyuk stressed.
Moreover, the demand for the precious metal is growing as a result of deteriorating relations between the United States and China, experts say. On Thursday, July 23rd, United States Secretary of State Mike Pompeo announced the collapse of the system of interaction between Washington and Beijing. In addition, the parties exchanged requirements for the closure of diplomatic missions. Against this background, investors began to fear the resumption of the trade war, says Artyom Deev, head of the analytical department at AMarkets.
Recall that the trade contradictions between the two countries began back in 2018. Then Donald Trump accused China of illegally obtaining American technology and increased duties on Chinese goods imported into the country, and Beijing introduced retaliatory measures. In 2019, the parties continued to exchange mutual restrictions, but in January 2020 they reached an armistice and signed the first part of the deal.
However, in July, Donald Trump said that he was not interested in continuing trade negotiations with China, and accused the Asian republic of the global spread of COVID-19. In addition, the head of the White House did not rule out the possibility of introducing additional duties on Chinese goods for allegedly untimely informing the world community about the emergence of coronavirus from the PRC.
“Donald Trump deliberately went to the escalation of the conflict, but the strengthening of the confrontation between the world's leading economies means for investors another decrease in the volume of world trade and a decrease in global GDP growth. In this situation, players transfer money from risky assets to reliable instruments, including precious metals, ”explained Artyom Deev.
Growing stock
In the current environment, experts highly assess the likelihood of further growth in gold prices in the near future. According to Vitaly Gromadin, a senior analyst at the Factory of Investment Ideas at BCS, within a few months the cost of the precious metal may reach $ 2,000.
At the same time, experts believe that the rise in gold prices may have a positive effect on the value of Russia's international reserves. According to the Central Bank, over the past year, the share of precious metals in the country's gold and foreign exchange reserves has grown from about 13% to 23%. By early July, the corresponding figure exceeded $ 130 billion. According to Alexander Razuvaev, such a volume of reserves allows you to quickly direct a sufficient amount of funds to support the economy.
“Significant gold and foreign exchange reserves are one of the factors of the strength of the state. These funds, if necessary, can be spent on paying off external debt or covering the budget deficit, ”the expert explained.
According to the Central Bank, today the total volume of the country's gold and foreign exchange reserves is estimated at $ 570 billion.At the same time, according to Yevgeny Mironyuk's forecast, a rise in the price of gold to $ 2,000 per troy ounce could lead to an increase in Russian reserves by almost $ 12 billion.