Gold’s ‘Cold Blooded’ Gain Shows Virus-Induced Rush Into Havens
Bloomberg
Published Feb 21, 2020 12:06PM ET
Updated Feb 21, 2020 05:41PM ET
Gold’s ‘Cold Blooded’ Gain Shows Virus-Induced Rush Into Havens
(Bloomberg) -- Investors are rushing to the safety of gold amid a selloff in U.S. stocks on mounting concerns the coronavirus outbreak will derail global growth.
Gold jumped as much as 2%, extending its climb to a seven-year high, as the S&P 500 Index headed for its first weekly loss since January. In a sign that the virus is starting to dent the world’s largest economy, business activity in the U.S. shrank in February for the first time since 2013 with the pandemic disrupting supply chains.
“The persistent, cold-blooded and measured shift in gold higher, despite the U.S. dollar, is telling,” Nicky Shiels, a metals strategist at Bank of Nova Scotia, said in emailed message. “The breakout is warranted and has legs.”
Gold futures for April delivery rose 1.8% to $1,649.50 an ounce at 10:50 a.m. on the Comex in New York, after reaching $1,652.10, the highest for a most-active contract since mid-February 2013. The metal is poised for a 3.7% gain this week, the biggest such increase June. The rush to haven assets also sent Treasury yields tumbling.
“Gold is in the midst of its perfect storm,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
Prices of bullion in euros and Australian and Canadian dollars climbed to records. Holdings in gold-backed exchange traded funds climbed for 22 straight sessions through Thursday, the longest ever run, according to data compiled by Bloomberg.
This stretch of inflows “certainly gives an indication about concerns around the global economy,” Andrew Jamieson, global head of ETF product at Citigroup Inc (NYSE:C). in London, said in an interview with Bloomberg TV.
The outbreak has worsened outside of China, withcases in South Korea climbing past 200, while tallies for Singapore and Japan topped 85. Chinese authorities adjusted the number of cases for the third time this month, raising more questions over the reliability of the data.
In more than half of the world’s 20 biggest economies, analysts now expect looser budgets this year — in other words, bigger deficits or smaller surpluses — than they did six months ago, according to a Bloomberg survey of economist forecasts.
The Commonwealth Bank of Australia expects the Federal Reserve to ease twice in the second half of the year as the virus threatens the global economy.
Still, lower U.S. yields and weaker equities could push gold prices further toward $1,750 an ounce even if the coronavirus is contained during the first quarter, according to Goldman Sachs Group Inc (NYSE:GS).
If the outbreak stretches beyond that, “we see substantially more upside from here -- toward $1,850 an ounce, depending on the magnitude of the global monetary policy response,” the bank said in a note Friday.
Get The News You Want
Silver futures also climbed on the Comex. On the New York Mercantile Exchange, palladium futures rose while platinum futures were little changed.
Written By: Bloomberg
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.