Gold storms past $1,800 an ounce to new record high

Gold pushed above $1,800 an ounce on Wednesday for the first time since 2011, with analysts expecting further gains as investors stock up on an asset they expect to hold its value while the coronavirus convulses the global economy.

Spot gold prices have surged 40% in the last 14 months and are within striking distance of 2011’s record high of $1,920.30 an ounce.

“We’ll be challenging the $2,000 level by the end of the year,” said Ross Norman, an independent analyst. “We are in a bull market for gold.” Powering the rally is economic and political uncertainty caused by the COVID-19 pandemic and action by central banks, which have responded to slowing growth and the virus by slashing interest rates and flooding markets with cash.

This has fuelled fears of inflation, which would typically devalue other assets, and has also lowered returns on government bonds, making gold more attractive.

Gold’s rise has been mirrored by a slide in real yields on 10-year US bonds, which at around minus 0.8% are near record lows.

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Financial investors, mainly in Europe and the United States, have been on an unprecedented buying spree.

Exchange-traded funds storing gold on behalf of these investors added 734 tonnes of gold worth $39.5 billion to their stockpile in first half of the year - more than in any previous full year and nearly half of all the gold mined during the period, according to the World Gold Council.

HSBC said in a note it expected gold to average $1,743 an ounce this year but to fall to about $1,500 in the coming years.

Meanwhile, technology shares boosted Wall Street’s main indexes on Wednesday as early signs of an economic rebound dominated over fears of another lockdown due to a jump in coronavirus cases across the country.

The Nasdaq notched an intraday record high on Tuesday but all the three main stock indexes finished lower as investors booked profits following a strong run on the back of upbeat economic data.

Bolstering hopes of a post-pandemic rebound, analysts said any setback in business activity due to the recent surge in infections would be short term, leaving their long-term forecasts for economic growth unchanged.

Markets also appeared to be in a wait-and-see mode before the beginning of the second-quarter earnings season, which kicks off next week with reports from big Wall Street banks.

Technology sectors firmed 1.2%, the most among ten of the 11 major S&P sectors trading higher.

At 10:05am, the Dow Jones Industrial Average was up 196.92 points, or 0.76%, at 26,087.10, the S&P 500 was up 23.65 points, or 0.75%, at 3,168.97, and the Nasdaq Composite was up 112.00 points, or 1.08%, at 10,455.89.

Biogen  jumped 5.8% after the company said it submitted the marketing application for its experimental Alzheimer’s disease therapy, aducanumab.

Separately europe’s stock markets slipped for a second straight session on Wednesday, with concerns about fresh spikes in coronavirus infections helping haven investment gold above $1,800 an ounce for the first time since 2011.

Europe’s key indices were down by up to 1.2 per cent down in the mid-afternoon.

A string of positive indicators, from China to the US in recent weeks -- as well as hopes for a vaccine and the easing of lockdowns around the world -- had fuelled a global stock markets rally that had lifted equities out of their March depths.

But while hopes that the world economy will recover remained intact, the ongoing spread of coronavirus has seen indices run out of steam over the past two days.

The pound, meanwhile, got a small boost against the dollar after Britain’s finance minister announced a package to help the economy recover from the coronavirus fallout.

The measures “will pack a sizeable punch and support higher private spending with significant implications for hard hit sectors such as construction, housing and hospitality”, said Kallum Pickering, an analyst with Berenberg.

Oil prices were steady on Wednesday, as rising US crude inventories and an increase in US coronavirus infections put the brakes on a recent recovery sparked by easing lockdowns.

Brent crude futures rose 9 cents to $43.17 a barrel by 1340 GMT. US West Texas Intermediate (WTI) crude futures were up 8 cents at $40.70 a barrel.

Both benchmarks are set for a fourth session of daily percentage changes of less 1% in either direction, shrugging off news that Opec member Libya was adding to global supplies by reopening its Es Sider oil terminal for exports.

Agencies