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Gold is again riding high on the world's commodity markets, topping $2,000 per ounce for the primary time and entering its third week of trading at above the benchmark level of $1,900 – its longest run at now since 2011. Overall, gold has risen in value by a fifth thus far this year.
The impact of COVID-19 on the world's markets has weakened the worth of the dollar. This, alongside ongoing geopolitical tensions within the Middle East and parts of Asia, helps explain its current streak, consistent with analysts.
Elsewhere, other assets including government bonds have slid in value as interest rates hit negative territory.
Governments are forced into huge stimulus packages to combat the consequences of the pandemic on their economies, which has led to an extra fall in returns on government borrowing.
The lockdown has also prompted a collapse in oil prices that energy analysts believe may have long-term consequences for oil as an asset class. This, again, will have the effect of dragging down real returns on debt-based investments.
Economists point to the inverse relationship between yields on government borrowings, inflation expectations and therefore the rise within the price of gold. In short, in times of stress and uncertainty, which abound at the present, gold (which has no yield), acts as a hedge and its price goes up.
Despite predictions of the market topping out, the planet Gold Council says inflows into gold-backed exchange-traded funds (ETFs) rose to a record-breaking 734 tons within the second quarter of the year, at a time when consumer demand for jewelry and other gold-related products has fallen, even in markets of traditional high demand, like India and therefore the Gulf states.
Demand for gold-backed investments is such questions are raised over the power of swap dealers to supply physical assets if contract holders prefer to take advantage of contracts and take delivery, possibly pushing the gold price even higher.
However, as long as yields fall and growth expectations within the world's biggest economies are low, markets seem to agree the gold price has further to travel.