The attraction for Gold is getting stronger in 2020 as Gold futures on Tuesday, finished at their highest since September 2011, with the metal climbing back to above the $1,800 an ounce mark. This is as the year to date inflows into bullion-backed exchange-traded funds (ETF) have topped the record full-year total, which was set in 2009.
This is against the backdrop of rising cases of the coronavirus disease and doubts about the state of global economy.
Investors have favored safe havens like gold and silver this year as the coronavirus pandemic has seriously undermined global economic growth, encouraging sustained inflows into gold-backed ETFs as central banks and governments unleash vast stimulus programs.
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The Chief Precious Metals analyst at HSBC Securities, James Steel said, ‘’A massive investor response to Covid-19 has pushed ETF holdings to record levels, the impact of which has outweighed the decline in jewelry demand and absorbed increases in recycling. Further inflows are expected as investors respond to elevated risks and low yields.”
Some experts have said that the current crisis has seen interest rates get low and increasing the appetite for investments in metals like gold and silver.
According to an initial data compiled by Bloomberg, Holdings in gold-backed ETFs rose to 3,234.6 tons on Tuesday. That’s up 655.5 tons so far in 2020, exceeding the rise that was recorded in 2009.
Gold spot was up 0.2% at $1,798.55 an ounce at 9:36 a.m. in London, after climbing above $1,800 to reach the highest since November 2011. In other precious metals, silver and platinum were higher while palladium recorded little change.
Goldman Sachs predicts that the metal could reach a record $2,000 in the next 12 months as bullion prices and holdings are widely expected to extend gains.
According to HSBC’s Steel, ‘’The near unprecedented fiscal and monetary peacetime response to Covid-19 supplies gold with two substantial bullish inputs: liquidity and debt. Low interest rates, monetary accommodation including balance-sheet expansion and heavy fiscal spending globally for the foreseeable future will cement and extend gold’s rally.”
It should be noted that the last time that gold traded above $1,800 an ounce was in September 2011, but it ended that year at $1,565 an ounce.