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Gold prices hit record high on Sino-US tensions, Covid concerns

By Michele Maatouk

Date: Monday 27 Jul 2020

Gold prices hit record high on Sino-US tensions, Covid concerns

(Sharecast News) - Gold prices hit a record high on Monday, rising above $1,900 for the first time since 2011 amid escalating tensions between the US and China and concerns about a second wave of coronavirus infections.
The yellow metal rose 1.6% to a fresh all-time high of $1,943.00 an ounce. Gold's previous record high was $1,920.30, reached in September 2011.

Spreadex analyst Connor Campbell said the safe haven commodity was "looking mighty attractive after another troubling weekend of Covid-19 and US-China headlines".

He pointed to the fact that Chinese authorities have taken over the premises of the US consulate in Chengdu after announcing its closure in retaliation for being kicked out of the Chinese consulate in Houston, Texas.

"Technically, the superpowers are all-square in this specific tete-a-tete - but investors are worried about what comes next," he said.

Meanwhile, growing worries about the pandemic added to gold's appeal, as the UK government decided to re-impose a 14-day quarantine on travellers returning from Spain after officials there warned a second wave could be imminent. The government said other countries were also under review.

Fears were further compounded after China posted its highest daily rise in new cases since April, while Australia's Victoria state reported the country's highest daily increase in infections, with authorities there warning that a six-week lockdown may need to be extended.

Naeem Aslam, chief market analyst at Ava Trade, said the next big target for gold is the $2,000 level, which he reckons could happen this week after the Federal Reserve meeting.

"The anticipation is that the Fed is going to send another dovish message and that is likely to bring more weakness in the dollar prices and more strength in the gold price," he said.

Russ Mould, investment director at AJ Bell, said gold's surge may deter some investors from taking a position. "But the metal's price only represents 0.59 time the value of the S&P 500 stock index's value and that is barely half the post-1970 average of 1.14x.

"It also pales next to the 1.60x times multiple that gold reached at its previous all-time peak on autumn 2011 and comes nowhere near the highs relative to the S&P 500 of the mid and late-1970s when inflation was running absolute riot. If inflation does pick up - perhaps thanks to the combination of record low interest rates, quantitative easing, supply-chain disruption around the world thanks to Covid and firms increasing prices to meet extra costs of simply staying in business -then this suggests gold has further to go (or, alternatively, the S&P 500 is about to suffer a nasty accident)."

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