Ben Winck, Business Insider US / June 2020
Gold futures leaped as much as 1.5% on Monday as surging coronavirus cases pushed investors into the popular hedge bet.
The rally drove contracts for August delivery to $1,779 per ounce at intraday highs, the precious metal’s highest level since 2012. Gold now trades roughly 15% higher year-to-date. On Tuesday morning, gold was trading at $1,752.
The rally drove contracts for August delivery to $1,779 per ounce at intraday highs
Investors typically rush to gold as they grow more worried of a stock market rout. An uptick in coronavirus cases throughout the US sparked new fears of a longer-than-expected recession over the weekend. Florida recorded three straight days of record-high case counts, while North Carolina, Texas, and Arizona posted similarly dire testing data.
Gold tumbled through the initial coronavirus sell-off before recovering as traders piled into safe-haven assets. Prices stabilized through May but sank in early June as growing risk-on attitudes drove capital into stocks and risky bonds.
The metal recently thrived on from the expectation of low rates remaining for years. Federal Reserve policymakers revealed in June they expect near-zero interest rates to last at least through 2022 to ensure a robust economic recovery. Such forecasts strengthen gold’s relative value for investors hungry for yield.
Investors are also positioning for a weakened US dollar to boost the metal’s price in the near future. Experts throughout the financial sector have flagged concerns of a dollar crash on the horizon. Stephen Roach, former chairman at Morgan Stanley Asia, cautioned on Tuesday the currency will collapse amid a swelling US debt pile and strained global trade relationships. A weaker dollar typically leads gold to appreciate as it turns cheaper for foreign investors.
Experts throughout the financial sector have flagged concerns of a dollar crash on the horizon.
Other second-wave plays turned higher through Monday’s relatively calm session. Popular stay-at-home stocks including Zoom, Netflix, and Peloton all notched fresh record highs. Stocks previously seen as bets for a smooth recovery, including American Airlines and Royal Caribbean Cruises, tanked more than 7% at intraday lows.
Source: Business Insider US