By Joe Wallace
Gold prices zoomed to a record Monday, as a weakening dollar
injected new momentum into a rally driven by uncertainty about the
Futures contracts for delivering gold in August shot up as much
as 2.2% to $1,940.10 a troy ounce, topping the previous intraday
peak of $1,923.70 from September 2011. They ended the day up 1.8%
at $1,931, a second consecutive closing record. Gold futures
reached an all-time closing high for the first time in nearly nine
years Friday, but remained short of the intraday record.
Monday's record marked a milestone in gold's bull run, which
many traders rank alongside those of 2008-11 and the late 1970s.
The gloomy outlook for the world economy, a decline in interest
rates, rising tensions between the U.S. and China, and the dollar's
depreciation have fueled the surge as investors have bought assets
they perceive to be havens.
"There are still a lot of things to be worried about, which is
why gold is attracting all this attention and all this money," said
David Govett, head of precious metals at commodities brokerage
"You're seeing money slipping out of the stock market or out of
other assets and just eking into gold," Mr. Govett added. "Gold, as
a small market, is moving a long way as a result."
The advance marked gold's seventh consecutive daily advance, the
metal's longest winning streak since February. Gold prices have
gained nearly 9% over the past month and about 27% this year,
making the metal one of the strongest-performing major assets in
The price of silver, seen as a store of value by investors as
well as having widespread industrial uses, rose even more sharply
than gold Monday. Futures for September delivery, the most widely
owned contracts, jumped 7.2% to $24.501 an ounce, the highest level
in almost seven years.
Adding impetus to gold and silver Monday was a weakening in the
dollar, which made the precious metals more attractive to investors
overseas. The ICE U.S. Dollar Index, which tracks the dollar
against the currencies of six trading partners, fell Monday,
extending a recent slide that has it on track for its worst month
in nearly a decade.
Gold's traditional inverse relationship with the dollar had
frayed this year, as both assets benefited from haven buying during
the pandemic. It is now reasserting itself, a factor that will
boost gold in the coming months if the dollar continues to slide,
said Joni Teves, precious-metal strategist at UBS Group.
Still, "the move in gold this year has really been driven by
rising strategic interest," said Ms. Teves. Investors who were
previously uninterested in the precious metal are now buying it, a
trend that could lift prices above $2,000 an ounce within six
months, she added.
Shares of precious-metals miners including Barrick Gold Corp.
and Newmont Corp. benefited from Monday's advance in gold and
silver, extending their recent gains. Some gold-mining stocks are
now up more than 50% this year.
Gold prices have leapt in London, the main hub for buying and
selling gold bars, as well as in New York's futures market. In
Friday's auction, prices topped $1,900 for the first time since the
Bank of England and N.M. Rothschild & Sons Ltd., now investment
bank Rothschild & Co., founded the daily price in 1919.
One factor that distinguishes the current surge in gold prices
from the bull run during and after the last global financial crisis
is the fragile state of demand for physical metal. Lockdowns and
economic uncertainty have crimped jewelry purchases in India and
China, normally two huge bullion markets.
So far, a burst of buying by investors has more than offset the
dearth of jewelry demand. But if financial demand dries up, prices
could fall without physical consumption to act as a cushion for
prices, said Ms. Teves.
Investors who wouldn't normally be active in the market until
European and U.S. hours bought gold in thin Asian trading Monday,
exaggerating the rise, according to Mr. Govett. "London this
morning is a little bit shellshocked," he said.
However, Mr. Govett added that gold could be knocked off course
in the event of a correction in the stock market that prompts
investors to sell precious metals to meet margin calls.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
July 27, 2020 14:20 ET (18:20 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Grafico Azioni Barrick Gold (TSX:ABX)
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