Gold extended its rally to mark it highest level in almost 8 yrs on concern that the health crisis will have a deep and lasting effect on the global economy, thus boosting demand for the safe-haven.
Futures in New York moved close to 1,800 oz, a mark last seen in Y 2011. Spreads between futures and spot prices remain wide, suggesting thinner liquidity, which is causing price dislocation.
Bullion has soared this year as the global heath crisis tipped economies toward recession and spurred central banks to launch huge stimulus measures. Since last month’s wave of forced selling, as equities sank, gold has staged a recovery.
COMEX gold futures for June delivery climbed as much as 1.6% at 1,788.80 oz, the highest for a most-active contract since October 2012.
Spot gold was more than 30 cheaper at 1,737.20, with the spread a feature of trading in recent wks amid physical market disruptions.
Overall, gold has room to run.
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 a huge currency debasement in the long term. That is the Key reason why gold is higher, and I would think that over the next few weeks or months, we will retest the high seen in Y 2011.”
The Fed’s massive US monetary program and the fiscal stimulus “could see long-end rates rise during the recovery phase, but not without rising inflation expectations, which should keep real rates suppressed.”
In this sceanario, investment demand for gold will continue to rise as capital seeks shelter from a long-term environment in which real rates are negative.
Negative real rates boosts the appeal of non-interest-bearing gold.
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. President Trump said he has “total” authority to order states to relax social distancing and reopen their economies.
Worldwide holdings in gold-backed ETFs have grown 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, silver futures also advanced on the COMEX, while platinum and palladium gained on the New York Merc.
Have a healthy day, Keep the Faith!
GLD, SLV, XAU, XAG, gold, silver, rally, ETFs, Fed, currency, coronavirus, President Trump, COMEX,