It is easy to forget that gold prices were going through a severe collapse in the first epidemic epidemics, but the Corona virus unleashed a large number of forces seeking to increase the demand for gold, which is a safe asset during crises.
In a report published by the American "Bloomberg" website, writers Stephen Frank, Vivien Le Chen and Elena Mazeneva said that the Corona pandemic was the driving force behind one of the most ferocious revival the gold market has ever seen.
At the end of trading in New York on Friday, the price of gold rose to $ 1902.02 an ounce, which is about 30% higher than the lowest price recorded in March, and just 1% less than the record high recorded in 2011.
Many concerns
Several fears manifested after that, the most important of which were the imposition of closures by the government, the decision of politicians to pass unprecedented stimulus packages, and the decision of central bankers to print money faster than ever to finance this spending.
Also among those fears is the return of inflation-adjusted US bond yields to become negative territory, in addition to the sudden decline of the dollar against the euro and the yen, and the escalation of tensions between the United States and China.
All of these problems have raised fears in some financial circles that an inflationary recession - a rare mix of slow growth and increased inflation that is eroding the value of fixed-income investments - could affect parts of the developed world, and this controversy is increasing in the United States, where The virus is still spreading and the economic recovery is faltering.
Investors' expectations for annual inflation have risen over the next decade - measured by the bond market benchmark known as a parity - over the past four months, after falling sharply in March.
On Friday, these expectations reached 1.5%, and are still below the levels recorded before the epidemic and less than the US Federal Reserve’s target of 2%, but it is almost more than a full percentage point of the return of 0.59% paid by record 10-year US Treasury bonds. .
According to Edward Moya, chief market analyst at Oanda, the main driver behind the recent gold rally was "the real rates that continue to fall and do not appear to be stabilizing any time soon."
Moya believes that gold attracts investors who are worried that the recession will overwhelm inflation and guarantee further facilities from the Federal Reserve.
Safe haven
US bond markets have been a driving force behind the rush into gold, which is seen as an attractive hedge, while Treasury bond yields that reduce the effects of inflation have fallen below zero.
In these circumstances, investors are searching for safe havens that will not lose their value, and the authors mentioned that the obsession with gold is no longer limited to investors only, but includes traders, and retail investors have helped put the holdings of the gold-backed ETF on the right track to achieve gains throughout the eighth week A dozen in a row, the longest winning streak since 2006.
Meanwhile, gold recorded its seventh weekly earnings on Friday, and analysts do not expect its price hikes to stop anytime soon.
"When interest rates are zero or close to zero, then gold will be an attractive hedging method because you will not worry about not getting interest on your gold," Mark Mobius, founding partner of Mobius Capital Partners, said in an interview with Bloomberg. I will buy gold now and I will continue to buy. "
Analysts predicted a significant rise in gold prices several months ago, and in April, Bank of America raised its 18-month price target to $ 3,000 an ounce.
"The global epidemic provides a sustainable boost to gold," said Francesco Blanche, head of commodities and derivatives research at Bank of America, noting impacts that include lower real rates, greater inequality and lower productivity.
He added that with the Chinese gross domestic product rapidly approaching the levels of the United States, supported by the widening gap in the number of cases of coronavirus infection, a geopolitical shift could appear that would increase the chances of reaching the goal of $ 3,000 over the next 18 months.
Bank of America's bold prognosis comes after the drop in gold prices at the beginning of March, as investors rushed to cash to cover losses on high-risk assets.
Motivational programs
Prices soon recovered after the Federal Reserve suddenly lowered the benchmark interest rate, with signs that the economic losses caused by the Corona virus would result in massive stimulus efforts from global governments and central banks, and it is not the first time that gold has received help from Like that.
From December 2008 to June 2011, the Federal Reserve bought $ 2.3 trillion in debt and kept borrowing costs close to zero in an attempt to support growth, which helped gold reach a record price of $ 1921.17 in September 2011.
According to Afshin Nabafi, head of trading at MKS PAMP Group, the Swiss refining and trade company, the crisis was a decade ago centered on banks, and now sees that gold is close to the price of two thousand dollars.
"This time, honestly, I don't see the end of this tunnel," he said, at least until the November US elections.