Gold price hits record high as investors’ fears over Covid-19 escalate

Precious metal rallies as yields on ‘safe’ state investments weaken amid stimulus efforts

Gold has rallied by more than a quarter this year, making it one of the best-performing mainstream assets. Photographer: Andreas Gebert/Bloomberg

Gold has rallied by more than a quarter this year, making it one of the best-performing mainstream assets. Photographer: Andreas Gebert/Bloomberg

 

Gold raced to a record high on Monday as the US’s deepening Covid-19 crisis sent the dollar tumbling further and encouraged nervy investors to choose the precious metal as the place to park their cash.

The price of the metal, used by investors as a store of value in times of stress, climbed as much as 2.4 per cent to a record $1,944.73 a troy ounce on Monday, blasting past its previous nominal high of $1,921 set in September 2011.

Gold has rallied by more than a quarter this year, making it one of the best-performing mainstream assets, as investors brace for the economic fallout of Covid-19 and seek to minimise the effects of sweeping central bank interventions on their portfolios.

“Gold has finally come on to Main Street as an asset people actually need to have,” said Peter Grosskopf, chief executive officer at Sprott, a precious metals specialist with $12 billion under management.

Global policymakers have launched huge fiscal and monetary stimulus measures this year to dull the economic blow caused by coronavirus. That has driven down yields on safe government bonds – with some US treasuries paying investors a negative return once inflation expectations are taken into account – and flattered gold, which offers no income.

Gold has marched relentlessly higher in recent sessions as doubts have grown over the global recovery from Covid-19.

Portfolios

Joni Teves, precious metals analyst at UBS, said she expected the metal to push towards $2,000 per ounce in the next six to 12 months as investors try to protect their portfolios against further falls in real interest rates.

However, she added, strong economic data could yet keep the rally in check over the next few months.

The metal is some way off its inflation-adjusted peak, analysts pointed out. Fahad Kamal, chief market strategist at Kleinwort Hambros, said that “when you factor in inflation, the all-time high of gold is about $2,500. . . when Soviet tanks rolled into Afghanistan in 1979”. – Copyright The Financial Times Limited 2020