Date: Fri, 24 July 2020
Author: Fred Imbert
Gold prices surged to an record-breaking high on Friday. This was caused by the surge in investors who sought safety in gold amid the rising tensions between US and China and the unsettled fears over COVID-19 pandemic.
Rising 0.4% and settling at $1,897.50 per ounce in gold’s August futures contract, this also marked gold’s straight day of gains as well as a seven-week winning streak.
Tensions between China and the U.S. continued to rise this week. Overnight, China ordered the U.S. to close its Chengdu-based consulate. Earlier this week, the U.S. had a Houston-based Chinese consulate closed.
“US-China tensions continue to escalate, which prompted a risk-off move in markets on Thursday and Friday,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note. He sounded out gold is also one of the best-performing assets this year, rising more than 24%. He also said as political uncertainty is likely to continue throughout the year, to which he forecast could lift gold to $2,000 per ounce.
Haefele also pointed out the move higher in gold comes as the U.S. dollar has fallen sharply recently. The dollar index — which measures the dollar’s performance against six other currencies — is down more than 1% this week and has fallen for five straight weeks.
“While we think gold will continue to be supported by rising geopolitical tensions, in our view the primary drivers of the gold price are its negative correlation to real interest rates and the dollar,” he said.
Gold’s gains also come as the coronavirus pandemic continues to devastate the global economy. More than 15 million coronavirus cases have been confirmed globally.
In the U.S. alone, over 4 million infections have been reported along with at least 144,552 deaths. Several states and countries have had to postpone or roll back reopening plans as cases keep rising.
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