Money and Markets

Gold rockets to nearly 8-year high as revived coronavirus concerns push investors to safe havens

Business Insider US
Gold bars are seen at the Czech Central Bank on Se
Gold bars are seen at the Czech Central Bank. (Getty)

  • Gold contracts for August delivery leaped as much as 1.5% to $1,779 per ounce, reaching the highest level in nearly eight years.
  • Investors piled into safe havens through the session as spiking coronavirus infections throughout the US ratcheted up fears of a prolonged recession.
  • The precious metal has also thrived on bets for interest rates staying near zero. Lower rates boost gold's relative value for yield-hungry investors.
  • Watch gold trade live here.

Gold futures leaped as much as 1.5% on Monday as surging coronavirus cases pushed investors into the popular hedge bet.

The rally drove contracts for August delivery to $1,779 per ounce at intraday highs, the precious metal's highest level since 2012. Gold now trades roughly 15% higher year-to-date. On Tuesday morning, gold was trading at $1,752.

Investors typically rush to gold as they grow more worried of a stock market rout. An uptick in coronavirus cases throughout the US sparked new fears of a longer-than-expected recession over the weekend. Florida recorded three straight days of record-high case counts, while North Carolina, Texas, and Arizona posted similarly dire testing data.

Gold tumbled through the initial coronavirus sell-off before recovering as traders piled into safe-haven assets. Prices stabilized through May but sank in early June as growing risk-on attitudes drove capital into stocks and risky bonds.

The metal recently thrived on from the expectation of low rates remaining for years. Federal Reserve policymakers revealed in June they expect near-zero interest rates to last at least through 2022 to ensure a robust economic recovery. Such forecasts strengthen gold's relative value for investors hungry for yield.

Investors are also positioning for a weakened US dollar to boost the metal's price in the near future. Experts throughout the financial sector have flagged concerns of a dollar crash on the horizon. Stephen Roach, former chairman at Morgan Stanley Asia, cautioned on Tuesday the currency will collapse amid a swelling US debt pile and strained global trade relationships. A weaker dollar typically leads gold to appreciate as it turns cheaper for foreign investors.

Other second-wave plays turned higher through Monday's relatively calm session. Popular stay-at-home stocks including Zoom, Netflix, and Peloton all notched fresh record highs. Stocks previously seen as bets for a smooth recovery, including American Airlines and Royal Caribbean Cruises, tanked more than 7% at intraday lows.

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