Gold prices have surged to record highs as worries over the global economy and the worsening COVID-19 crisis have pushed many investors into safe haven assets.
Early on Monday, gold futures hit a price of $1,944 per ounce, surpassing its previous all-time intraday peak of $1,923.70 established in September 2011.
CNN reported that the yellow metal has jumped about 27% in price so far this year – making it one of the top performing assets for the year.
UBS analysts expect gold prices to reach $2,000 per ounce before the end of this year, primarily because of low interest rates in the U.S., the weakening dollar and escalating tensions between the U.S. and China.
“Gold is the clear beneficiary of safe haven demand,” said Stephen Innes, chief global markets strategist at AxiCorp in a research note.
David Govett, head of precious metals at the commodities brokerage firm Marex Spectron, told the Wall Street Journal: “There are still a lot of things to be worried about, which is why gold is attracting all this attention and all this money. You’re seeing money slipping out of the stock market or out of other assets and just [moving]into gold. Gold, as a small market, is moving a long way as a result.”
Hussein Sayed, chief market strategist at FXTM, said gold prices have pushed higher as U.S. government bond values have dropped – based on the premise that the Federal Reserve will keep interest rates very low for an extended period as the economy remains weak.
In tandem with slipping gold prices, the U.S. dollar has slipped to a 22-month low versus the euro and a 4-month low against Japan’s yen.
“That’s partly driven by a sense that the U.S. is having a harder time controlling the [COVID-19] virus than others, which will see the U.S. economy underperform,” said Kit Juckes, chief strategist at Societe Generale.
Interestingly, as demand for gold has surged from investors, demand for gold jewelry – especially in huge markets like India and China – has plunged due to the pandemic.
However, Larry Light wrote in Forbes that long-term investors should steer clear of gold as it is “notoriously volatile.”
“While inflation is barely existent now, some fear that all the government stimulus pumped into economies worldwide will eventually produce spiraling consumer prices. Isn’t gold worth keeping for that?,” Light wrote. “Unfortunately, gold’s volatility also renders it less useful as an inflation offset over time.”
Light added that taking into account inflation, gold “would need to be more than 50% higher than the present level to equal what it was back” in the inflationary 1970s.
As of 10:05 a.m. EDT, gold traded at $1,935.60 per ounce.