Gold hits highest in over 7 years

Gold prices climbed more than 2 per cent on Monday to their highest since February 2013, as spikes in coronavirus cases in several countries outside China deepened worries about a hit to the global economic growth, prompting a flight to safe havens.

Spot gold was up 1.6 per cent at $1,669.80 per ounce by 0713 GMT, after climbing to $1,678.58 earlier in the session. US gold futures rose 1.5 per cent to $1,672.80.

“The thinking is that fewer people are holding shares, selling down in particular, and that money has to fall into havens,” said Michael McCarthy, chief market strategist at CMC Market.

“The impact on the global economy also means we will likely see a lower interest rate environment for longer.”

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Global equities extended losses as concerns about the spread of the virus beyond China grew with sharp rises in infections in Italy and Iran, while South Korea raised its infectious disease alert to its highest level.

The World Health Organization said it is worried about the growing number of cases without any clear link to China.

“Gold has finally established some serious momentum, and more negative coronavirus headlines will see a test of $1,700 an ounce on (safe-)haven flows, sooner rather than later,” Jeffrey Halley, senior market analyst at OANDA, said in a note.

Among other safe havens, the US dollar edged higher, while the benchmark US 10-year Treasury yield fell to its lowest since July 2016.

The Japanese yen further backed away from its lowest since April 2019 against the US currency.

Reuters