Gold forges record high as investors seek safety

[NEW YORK] Gold soared to a record high on Monday as investors rushed into the safe-haven commodity on concerns about heightened China-US tensions, spiking virus infections and a lack of progress on a new stimulus bill in Washington.

"Always a sign of trouble, gold continued its red hot streak on Monday, the safe haven commodity looking mighty attractive after another troubling weekend of Covid-19 and US-China headlines," said Spreadex analyst Connor Campbell.

Dollar weakness was a big factor behind gold's takeoff, analysts said, as the greenback continued its retreat against the euro and other major currencies.

The fall in the US currency comes amid expectations that the Federal Reserve will keep interest rates lower for longer and that the economy could underperform those in other regions due to the coronavirus.

"A further escalation of tensions between China and the US, with the tit-for-tat embassy closure, was the most obvious reason for the change in market tone," said Rupert Thompson, chief investment officer at Kingswood.

"But the continuing uncertainties over the prospects for the economic recovery may also have contributed," he said.

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The gold price hit an all-time high of US$1,945.72 per ounce, well above its previous record of US$1,921.18 in 2011. It later pulled back somewhat. Prices of the yellow metal have jumped more than 25 per cent this year.

Relations between the world's two superpowers took another negative turn when the US mission in Chengdu was ordered to shut in retaliation for the forced shutdown of the Chinese consulate in Houston, Texas.

'WORRIED WHAT COMES NEXT

"Technically, the superpowers are all-square in this specific tete-a-tete - but investors are worried about what comes next," said Mr Campbell.

As gold rose, stock markets - a riskier investment - wobbled, with investors fretting over the impact of the virus on the economy.

In Europe, only Frankfurt held steady at the close after a key survey showed that German business confidence rose for the third month in a row in July. London and Paris both ended lower.

But Wall Street stocks finished solidly higher, with the tech-rich Nasdaq surging 1.7 per cent in a reversal from weakness late last week.

The chief executives of Apple, Amazon, Google and Facebook are scheduled to appear Wednesday for a hearing that will look at whether Big Tech has attained too much dominance as they have become increasingly central to the global economy.

The event is part of a news-jammed week in the United States that also includes a trove of major earnings reports, a Federal Reserve meeting and the first assessment of second-quarter growth, which is expected to be historically bad given the shutdown of the American economy.

AFP