The Strategist

Gold prices update nine-year high

07/10/2020 - 02:59

Gold prices rapidly surpassed the level of $ 1800 per troy ounce on the world market; the quotations have grown by more than 20% since beginning of the year. The risks of the second wave of coronavirus, the aggravation of relations between the USA and China, as well as large-scale monetary recharge of developed economies spurred demand.

According to Reuters, on Wednesday July 8, gold quotes on the spot market updated the maximum since September 2011, reaching $ 1,817.71 per troy ounce. Since the end of last year, the price of gold has grown by more than 20%, outstripping the growth rate of many financial instruments and indices.

Factors supporting the demand for a defensive asset remain the same. Among them are the risks of the second wave of the COVID-19 pandemic, tensions between the US and China, as well as the crisis state of the economies of developed countries after strict quarantine measures. In addition, the policy of low interest rates and unlimited liquidity provision by central banks stimulate the flow of investors' funds in gold.

According to Bank of America, the volume of monetary stimulus measures reached $ 9.27 trillion by the middle of the year, and the volume of fiscal stimulus - $ 11.36 trillion.

The largest incentive programs were observed in the US ($ 6.4 trillion), the European Union ($ 3 trillion) and Japan ($ 2.1 trillion).

The main buyers of precious metals are gold exchange-traded funds (ETFs). According to the World Gold Council, the net inflow in them reached 734 tons ($ 39.5 billion) in the first half of the year, which significantly exceeds the previous record both in tonnage (646 tons in 2009) and in money ($ 23 billion in 2016) . Only in June, funds received an increase of 104 tons. Demand for protective assets was highest in the countries most affected by coronavirus (USA and UK), and was much weaker in countries that successfully lifted quarantine measures (Germany and Switzerland).

At the same time, prices for other precious metals show less impressive dynamics. Only silver has been actively growing in price lately, but since the beginning of the year it has risen in price by less than 5%. For more than a month, platinum quotes have remained at the beginning of the year, and the cost of palladium since the beginning of the year decreased by 11%.