Gold blasts past US$2,000 level as traders rush into gold-backed ETFs as hedge against global uncertainties
- RBC, Bank of America and Goldman Sachs predict higher prices for gold in the coming 12 to 18 months
- World Gold Council says Covid-19 pandemic is far from over, impact on global economy yet to be determined
Gold has surged past the US$2,000 per ounce level, setting yet another all-time record as the yellow metal continues to benefit from a slew of risk events, including the coronavirus pandemic, inflation fears and global economic uncertainties.
The precious metal reached US$2,019.21 per ounce overnight, before paring the rally to US$2,016.87 in recent trades. It has appreciated nearly 34 per cent this year as investors have piled into safe-haven assets as insurance against market turmoil.
Some see prices rising much higher from here. RBC Capital Markets within days has made the bullish call of US$3,060 per ounce by the first quarter of next year. Bank of America, in a report titled “The Fed can’t print gold” in April, said gold could be headed for US$3,000 per ounce in 18 months. Goldman Sachs sees a slower pace of gain, forecasting last week that it could rise to US$2,300 within 12 months.
The US Federal Reserve has thrown the kitchen sink at the coronavirus, vowing to keep interest rates at near zero and launching an expansive bond buying programme, among other things. This coincides with trillions of dollars in relief spending by the US Congress to try to help businesses and laid-off workers deal with the pandemic that has claimed nearly 160,000 US lives and remains on the rise in much of the nation.
“This rally could keep on keeping on until the Fed has no option but to raise rates to defend inflation. But the market suspects that’s many years away,” said Stephen Innes, chief global markets strategist at AxiCorp. “In the meantime, those nasty US deficits will weigh heavy on the US dollar outlook, which will create even more demand for gold. Kinda the virtuous circle for gold,” he added.
Meanwhile, investors’ rush into gold-backed exchange-traded funds has made their worldwide holdings second only to the US, according to Bloomberg. Such ETF gold holdings rose to 3,365.6 tons on Monday, a jump of 30.5 per cent this year, versus the US government’s holding of more than 8,000 tons, Bloomberg reported.
The World Gold Council, a trade group, said the yellow metal’s could still have room to rise. The Covid-19 pandemic is far from over and, more importantly, its impact on the global economy is yet to be determined, it said last week.
“There are indications that some countries like China, South Korea, Germany and other European nations have started to turn a corner,” it added. “However, at a global level, early hopes of a fast recovery are all but gone. Instead, market participants are bracing for a bumpy ride and a longer road to recovery.”
