Gold sprints to nine-year peak on softer dollar

Bengaluru — Gold jumped more than 1% on Wednesday to its highest in nearly nine years, driven by a weaker dollar and as the expectation of more stimulus to resuscitate pandemic-hit economies lifted the metal’s appeal as an inflation-hedge.

Spot gold was up 0.9% at $1,857.86/oz by 2.32am GMT, after hitting its highest since September 2011 at $1,865.35/oz earlier in the session. US gold futures rose 0.8% to $1,858.20.

“The spectre of these stimulus packages has pushed investors back into non-yielding assets like gold,” said ANZ analyst Daniel Hynes.

“The likelihood of interest rates remaining low for the foreseeable future and the weaker US dollar have really boosted investor appetite.”

EU leaders on Tuesday sealed a €750bn recovery plan, while White House officials and top congressional Democrats discussed a next round of relief that would include extended unemployment insurance and more money for schools.

Helping bullion’s rally, the dollar index held near a more than four-month low.

Coronavirus cases continued to surge in the US, with President Donald Trump warning the virus would probably get worse before it gets better.

Underscoring the pandemic’s effect, Japan’s factory activity contracted for a 15th consecutive month in July.

Central banks have slashed interest rates and rolled out a wave of stimulus measures to cushion the economic damage from the pandemic, helping gold prices surge more than 22% so far in 2020.

“Gold markets continue to receive their jet fuel from two critical ingredients: government debt; and central bank liquidity,” Stephen Innes, chief market strategist at financial services firm AxiCorp, said in a note.

A Reuters poll showed the metal could push towards record highs over the next 18 months as the crisis encourages investors to hoard it as a hedge against possible turmoil in wider markets.

Silver soared again, rising 5% to $22.40/oz, its highest since October 2013. Palladium fell 1.2% to $2,132.73 and platinum eased 0.1% to $880.60.

Reuters