Spot gold smashes through $2,000 with haven seekers piling in

By Steven Frank and Yvonne Yue Li

Spot gold soared to a record above $2,000 an ounce as investors continue to seek a haven for their assets amid daunting economic and geopolitical risks.

Gold has rallied in the past year as the coronavirus pandemic prompts unprecedented amounts of stimulus to shore up economies, including lower rates, which are a boon for non-interest-yielding gold. Simmering geopolitical tensions -- including a massive explosion at Lebanon’s main port on Tuesday -- are also boosting demand.


“People want safety, and safety right now is gold because Treasuries are not yielding up,” Bob Haberkorn, senior market strategist at RJO Futures, said by phone.

Spot gold rose as much as 1.7 per cent to $2,009.61 an ounce, and traded at $2,008.55 as of 2:22 p.m. in New York. Bullion for immediate delivery surged 11 per cent in July, the biggest monthly gain since 2012.

The most-actively traded gold futures on the Comex also reached a record on Tuesday before settling at $2,021. Spot silver rose 6.7 per cent to $25.93 an ounce, while spot platinum and palladium also advanced.

Holdings in both gold- and silver-backed exchange-traded funds have climbed to records in the past week amid concern about the fallout from the pandemic. Investors are so worried about the global outlook that worldwide holdings in gold-backed ETFs now stand behind only the official U.S. reserves of bullion after they surpassed Germany’s holdings.

The impact of the pandemic has driven real yields deeper into negative territory, which has boosted interest in the haven of gold. The dip below -1 per cent on the 10-year is “a pretty big level,” according to TD Securities analyst Ryan McKay.

Investors are closely monitoring efforts in Washington to negotiate a new coronavirus relief package that many see as key to keeping the economy afloat as the pandemic curbs activity. The pressure is building, with the Senate set to leave on a break Friday, when crucial jobs data is due. Senate Democratic leader Chuck Schumer said earlier Tuesday stimulus talks with the White House are finally moving in the right direction but they remain far apart on some issues.

“What Schumer was saying suggests we will get a package and reverse the sudden stoppage of benefits,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets. “It means the Treasury will borrow trillions more which someday we will have to repay.”

Even as gold hits new highs, there are plenty of forecasts for further, substantial gains. Goldman Sachs Group Inc. says gold may climb to $2,300 as investors are “in search of a new reserve currency,” while RBC Capital Markets puts the odds of a rally to $3,000 at 40 per cent.