Bull Run: Gold Climbs to Nine-Year High on Coronavirus Stimulus Bets

Chart 10-year US Treasury bond yields vs. 10-year breakeven inflation expectations. Source

Gold prices today hit a fresh all-time high of Rs 50,021 per 10 grams, backed by positive trends in worldwide rates, coupled with a weaker dollar.

With this in mind, gold prices look set to continue to rise over the coming months amid strong seasonal demand and continued uncertainty over the outlook for the global economy.

The resultant boost to demand for safety may help both gold and the dollar, said DailyFx strategist Margaret Yang, adding technical corrections were unlikely to change the metal's uptrend "in the mid- to long-term".

Spot silver climbed 7.2 percent to US$22.8366 an ounce, the highest since 2013, before paring some of the gains to trade at US$21.81 by 10:43am in London yesterday.

Earlier, Comex Gold in the United States rose by $26.50 an ounce to nine-year high of $1,844 on the possibility of a fresh stimulus in the U.S. and Europe, besides growing tensions between China and the US.

Silver future prices continued their climb in the Indian commodity markets on Wednesday, in line with global markets amid rising coronavirus cases and ongoing tensions between U.S. and China.

The biggest risk factor for gold's rally is that record high prices may further weaken consumer demand in India, says Kotak Securities. "We believe this is happening and may sustain silver at higher prices still".

"Like gold, silver has benefited this year from safe haven demand and falling long term US real yields", Vivek Dhar, an analyst at Commonwealth Bank of Australia, said in a note. "Weak US dollar also supported the yellow metal prices", said Ajay Kedia, director, Kedia Commodity Comtrade.

The vast amounts of stimulus unleashed by governments and central banks have also aided prices and, after the success of a European package this week, focus turns to negotiations on legislation to prop up the USA economy.

David Coombs, head of multi-assets at investment manager Rathbones, said that with interest rates going nowhere any time soon, he remained a "buyer of gold at this level". In fact, gold prices have gained by ₹1,295 from ₹48,886-level logged on July 1. Silver's performance this year now exceeds that of gold, which has leapt 22 per cent in 2020 towards record highs above $1,800 an ounce.

The performance of silver, which also has industrial uses, relative to gold this month reflected market optimism for a global industry revival, said Cailin Birch, global economist at the EIU.