Gold rose to within striking distance of $2,000 for the first time as demand surged ahead of an interest rate decision by the US central bank.
The price of the precious metal for immediate delivery hit a new all-time high of $1,980.57 per troy ounce on Tuesday morning in Asia. Gold has risen by more than 30 per cent year to date, making it one of the best-performing mainstream assets in 2020.
Viewed by investors as a haven during times of uncertainty, gold has jumped by about 9 per cent in the past six trading sessions as concerns have grown over the economic impact of US coronavirus outbreaks.
The recent gains have come at the expense of the dollar as investors have bet that the worsening Covid-19 situation in the US will prompt more economic stimulus measures. A weaker dollar is typically viewed as bullish for gold partly because it makes the metal cheaper for international buyers.
The dollar index, which tracks the US currency against a basket of peers, is trading near its lowest levels since mid-2018.
Investors said gold’s upward momentum reflected growing expectations that the Federal Reserve could signal new policy measures when its rate-setting committee meets on Wednesday.
While traders doubt the Fed will turn to negative interest rates, some believe it could adopt more unconventional measures such as yield curve control or setting upper limits on Treasury yields.
“The Fed is likely to signal it continues to have its finger on the trigger — that it stands ready to ease policy more if necessary,” said Thomas Costerg, senior US economist at Pictet Wealth Management.
Others pointed to the fact that the coronavirus had made obtaining physical gold more difficult, also helping to push up prices.
“Anyone involved in the physical market would be aware of the fact that at the dealer level, access, particularly to gold and silver coins, has been curtailed as a result of the virus,” said Robert Rennie, global head of market strategy at Westpac.
Most Asian stock markets were higher on Tuesday morning. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks climbed 1.2 per cent while Hong Kong’s Hang Seng rose 0.9 per cent. Japan’s benchmark Topix added 0.2 per cent.
Futures tipped Wall Street’s S&P 500 to rise 0.4 per cent when trading begins later in the global day, after rising by 0.7 per cent overnight. London’s FTSE 100 was set to gain 0.2 per cent.
Global currencies also marched higher against the greenback after Republicans unveiled a $1tn stimulus plan that would slash emergency unemployment insurance by two-thirds. The Australian dollar strengthened 0.3 per cent to $0.7171 while the pound was up 0.1 per cent at $1.2894.