Gold extended its strong rally to hit the highest mark in more than 7 years on concern that this health crisis will have a devastating effect on the global economy, hammering corporate earnings while driving demand for safe-havens.
COMEX futures in New York moved closer to 1,800 oz, the mark last seen in Y 2011. Spreads between futures and spot prices remain wide, suggesting thinner liquidity, which is further worsening price dislocation.
“Liquidity conditions are challenging and market participants are understandably cautious,” UBS Group AG, said Tuesday in a note. “Gold’s journey has been bumpy so far, but given the macro backdrop we think the destination remains higher.”
Bullion has soared this year as the global heath crisis tipped economies into recession and spurred central banks to launch huge stimulus measures.
COMEX gold futures for June delivery climbed as much as 1.3% to 1,785 oz, the highest since October 2012, and was little changed at 10:25a in London.
Spot gold was more than $40 less a 1,720.34, with the huge spread a feature of trading in recent weeks amid physical market disruptions.
Overall, gold has room to run, because what’s happening here is that the Fed is expanding its balance sheet and every other central bank in the world is doing the same,
What we are looking at is massive currency debasement in the long term. That is the major reason why gold is higher, and I believe that over the next few weeks or months, we will test the high that we saw in Y 2011.
Gold’s latest upswing has come even as risk sentiment received a boost after China’s trade data beat estimates, while the pace of coronavirus infections has slowed in some countries, with the focus shifting toward how lockdowns can be eased.
Banks including UBS Group AG have boosted price targets for the precious Yellow metal.
Worldwide holdings in bullion-backed ETFs have gtown to a record on rising demand, with investors seeking additional portfolio protection.
Monday, volumes in SPDR Gold Shares (GLD), the largest such fund, surged above 1,000 tonnes to the highest since mid-2013.
In other precious metals, platinum gained while silver and palladium were little changed.
Have a healthy day, stay home, Keep the Faith!