Gold poised to challenge RM7,686 as virus resurgence fans demand

With real US interest rates negative, banks are forecasting that gold will hit a record of RM8,540 in 12 months

SINGAPORE • Gold is on the cusp of challenging the hard-to-crack US$1,800 (RM7,686) an oz mark, potentially opening the way for a move toward its record price, as a resurgence in virus cases risks impeding the global economic recovery.

Futures rallied to just shy of the level last seen at the end of 2011, the year bullion notched its all-time high, as cases of Covid-19 climb from Tokyo to Germany. City and state officials in hotspots across the US are considering slowing or reversing reopening plans, while the European Union is weighing whether to keep a ban on Americans entering the bloc when external borders reopen.

Bullion has jumped this year as the US Federal Reserve and other central banks lowered interest rates, while governments worldwide pumped in trillions in stimulus to rescue economies hurt by the pandemic. Aided by concerns of currency debasement and a potential jump in inflation, investors are turning to gold. Holdings in bullion-backed exchange-traded funds have soared to a record, increasing almost 600 tonnes in 2020.

“Gold has been boosted by a weaker US dollar in recent days and further increases in the number of new Covid-19 cases,” Carsten Fritsch, an analyst at Commerzbank AG, said in a note. “It is no surprise then that investors are seeking refuge in a store of value such as gold.”

Gold for August delivery rose as much as 0.8% to US$1,796.10 an oz on the Comex, the highest level since 2012. Futures peaked at US$1,923.70 in September 2011. Premiums to spot prices in London widened again.

With real US interest rates negative, banks such as Goldman Sachs Group Inc now forecast gold will hit a record US$2,000 in 12 months. — Bloomberg