Gold roars out of the blocks in ‘21 as dollar, real yields hurt

By Ranjeetha Pakiam

Gold powered to the highest level in almost two months above $1,900 an ounce, aided by a weaker dollar, building on the biggest annual advance in a decade. Silver also surged on the first full trading day of the new year, while platinum advanced to its priciest since 2016.

Bullion is rallying as a gauge of the US currency languishes at the lowest level since 2018 after sliding for three quarters. The gains in the haven come even as US and global stocks are at all-time highs amid expectations that widespread vaccine distribution in 2021, further central bank support, and government aid will reignite growth and underpin better corporate profits.

Gold’s recent climb has also been aided by renewed declines in US real yields, which boost the precious metal’s allure. Real yields -- the difference between nominal benchmark bond yields and the rate of inflation -- were at -1.092 per cent on Friday, near last year’s nadir. The figure ticked up on Monday.

“I see gold being pushed higher by lower real interest rates and higher inflation expectations,” said Nicholas Frappell, global general manager at Sydney-based ABC Bullion. “The market is not looking for any signs of tightening should inflation pick up in the near term. Gold traditionally outperforms when real interest rates are low.”

Spot gold climbed as much as 1.4 per cent to $1,925.71 an ounce, the highest since Nov. 9, and traded at $1,923.74 at 7:16 a.m. in London as the Bloomberg Dollar Spot Index fell 0.3 per cent. In 2020, the precious metal rose 25 per cent. Silver rose as much as 2.9 per cent, and platinum hit $1,101.26 an ounce, the highest since 2016.

On the coronavirus front, US daily cases soared to a record of nearly 300,000 after the holidays, while global cases climbed above 85 million. The US vaccine rollout is picking up speed and could be fully on track within a week or so, said Anthony Fauci, the nation’s top infectious disease expert. U.K. Prime Minister Boris Johnson said tougher lockdown measures in England, including school closures, will probably be needed as cases of a new virus variant surge.

Meanwhile, in US politics, the state of Georgia holds a run-off election Tuesday for two US Senate seats that will determine control of the chamber, while Congress meets on Wednesday to count electoral votes and declare the winner of the 2020 presidential election .

Political uncertainty and the build-up of tensions in Washington was also helping to support gold and silver, said Avtar Sandu, a senior manager for commodities at Phillip Futures Pte.