The Strategist

Gold prices go up as pandemic-related fears grow

04/22/2021 - 04:07

Gold is approaching $1800 an ounce after a two-month break. The metal rose by almost 3.5% in five days. The rise in prices is linked to a decline in US rates and concerns about the outlook for the global economy amid an increase in the number of coronavirus-infected people around the world.

Bullion Vault
Bullion Vault
Gold prices on the global spot market renewed a two-month high on April 21. According to Reuters, the cost of the metal rose 1.13% to $ 1797.4 per troy ounce, the highest value since February 25. In five days of uninterrupted growth, gold has added 3.5%, and against the lows of late March - almost 7%.

The recovery of gold prices occurs on the background of decrease of rates on the American market.

On Wednesday, the yield on 10-year US Treasuries fell to 1.554% p.a., down 22 basis points from the 14-month high set on March 30. Gold in the investment portfolio does not offer any returns and when real yields on debt instruments rise, the precious metal loses out to bonds. When rates fall, however, the precious metal becomes more attractive.

Additional support for prices is added by heightened expectations of a third wave of the coronavirus in the world. According to the American Johns Hopkins University, in recent days the world recorded more than 850 thousand of those infected with coronavirus, which is twice as high as in mid-March. This is not the first time when quarantine restrictions have been extended in many European countries. This month, in particular, lockdowns have been extended in France and Italy. 

However, interest in investments in the precious metal is not growing from all categories of investors. According to Bloomberg, total assets of gold ETFs are estimated at 3,085 tonnes, down 20.5 tonnes from the end of March. Analysts said the noble metal's current price rise is perceived by professional investors as short-term and therefore is not causing a new rush. Demand for the metal is growing from the jewellery industry, which is recovering from last year's dip, as well as from private investors, experts say.