Gold surged to a fresh record, fueled by dollar weakness and low interest rates. Silver headed for its best month since 1979.
Spot bullion is up more than 10% in July, heading for its best month since 2016 as U.S. real yields lingered near record lows. While the ferocity of rallies in both gold and silver cooled in the middle of the week, most market watchers predict there may be more gains ahead.
Both metals have added about 30% this year, with gold and silver exchange-traded funds boosting holdings to a record, as concern about the fallout from the coronavirus pandemic fuels demand for havens. The Federal Reserve this week repeated a vow to use all its tools to support the U.S. economy, with governments and central banks worldwide already unleashing vast amounts of stimulus to shore up growth.
“After a brief consolidation period post-FOMC, speculation around President Trump’s call to delay the election shook the market and saw the yellow metal recover,” TD Securities strategists including Bart Melek said in a research note. “In addition to the sudden haven-type flows, poor economic data across the U.S. and Europe keep the hopes for further stimulus high, the dollar weak and real rates on a firm downtrend.”
Increasing deaths in several U.S. states and a partial lockdown in northern England show the pandemic is still wreaking havoc.
Adding to investors’ concerns, President Donald Trump floated the idea of postponing the November election, after dismal economic data Thursday. The European GDP numbers also show an unprecedented slump in the second quarter. Yet, Chinese manufacturing figures indicate continued upward momentum in the recovery, with silver getting added support from bets on stronger industrial demand amid concerns over supplies.
Spot gold rose as high as $1,983.36 an ounce Friday -- a fresh record -- and was trading up 0.7% at $1,970.66 as of 2:58 p.m. in New York. December Comex gold futures hit $2,005.40 before paring gains to settle 1% higher at $1,985.90 an ounce, as the dollar edged out of a five-day slump. The greenback is still weak amid concerns its status as the world’s reserve currency of choice is at risk.
Spot silver advanced 2.9% to $24.18 an ounce after a three-day pause in its rally.
“We remain bullish with gold and silver and would not be surprised to see a speculative bull run on silver,” said Frederic Panizzutti, managing director at MKS in Dubai. “Gold at $2,000 would put silver at around $30.”
Gold traders on Thursday declared their intent to deliver 3.3 million ounces against the August Comex contract, the largest daily delivery notice in bourse data going back to 1994.
With more stimulus on the horizon, Goldman Sachs Group Inc. has said that gold is the currency of last resort amid an inflation threat to the dollar. The bank forecasts a rally to $2,300. Bank of America Corp. reiterated Friday that prices could soar to as high as $3,000, while JPMorgan Chase & Co. sees the rally losing steam later this year.
“Central-bank rate easing and U.S. bond yields gravitating toward zero are solid underpinnings for gold, as is the potential for increased U.S. stock-market volatility approaching the presidential election,” Mike McGlone, Bloomberg Intelligence commodity strategist, said in a note.
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