As good as...? Gold shines again as dollar weakens
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[August 05, 2020] By
LONDON (Reuters) - Gold jumped to a record
high on Wednesday, pushing further past $2,000 in the face of a weak
dollar, falling U.S. Treasury yields and expectations of more stimulus
measures for the pandemic-ravaged global economy.
European stocks rallied <.STOXX> thanks to a batch of positive earnings.
So did U.S. equity futures <ESc1> <1YMc1>, indicating a firm open for
Wall Street. MSCI's broadest index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> hit a 6-1/2 month peak, though the blue-chip Nikkei
But it was the relentless rally in gold that held the spotlight as
prices hit a record around $2,044 per ounce <XAU=>. [GOL/]
The precious metal, which has soared more than 30% this year, is
benefiting from heightened uncertainty around the long-term effects of
the global health crisis.
Weakness in the dollar, which fell back towards recent two-year lows,
and falling U.S. yields have encouraged investors to look for an
alternative store of value - boosting the appeal of gold.
"What we're seeing at the moment with the dollar, bond yields and gold
are macro trades of concern - not just about the coronavirus but also
about the fiscal cliff in the U.S.," said Seema Shah, chief strategist
at Principal Global Investors in London.
"There are real concerns that without a (U.S. stimulus) deal, we will be
looking at a very tough fourth quarter for the U.S. economy and
therefore the global economy."
White House negotiators on Tuesday vowed to work "around the clock" with
congressional Democrats to try to reach a deal on coronavirus relief by
the end of this week, as the pandemic takes a heavy toll on American
The global death toll from the coronavirus surpassed 700,000 on
Wednesday, according to a Reuters tally, with the United States, Brazil,
India and Mexico leading the rise in fatalities.
Graphic - Coronavirus and financial markets:
[to top of second column]
Gold bars are stacked in the safe deposit boxes room of the Pro
Aurum gold house in Munich, Germany, August 14, 2019.
REUTERS/Michael Dalder/File Photo
DOLLAR WEAKER, AGAIN
This backdrop has boosted expectations for more stimulus, with the president of
the Federal Reserve Bank of San Francisco saying on Tuesday that the U.S.
economy will need more support than initially thought.
Concern about the U.S. economy as confidence in Europe's outlook grows sparked
fresh falls in the dollar.
The euro firmed 0.3% to $1.1839 <EUR=EBS>, the Australian dollar rallied 0.7% <AUD=D3>
and sterling was up 0.4% at $1.31. In offshore markets, the Chinese yuan rose to
a five-month high of 6.9384 and was last up 0.5% <CNH=EBS>.
That left the dollar index pushing back towards last week's two-year low of
"The ongoing fall in U.S. real yields is helping to lift the price of gold and
weakening the U.S. dollar," said Lee Hardman, currency analyst at MUFG, adding
that the bank had lowered its forecasts for the dollar on the assumption that
the Fed would loosen policy further this year.
U.S. Treasury yields edged higher but kept their lows in sight. Five-year
Treasury yield <US5YT=RR> hit a record low on Tuesday and the benchmark 10-year
yield fell to a five-month low at around 0.51% <US10YT=RR>.
Oil prices rose to their highest since early March after data showed a big drop
in U.S. crude inventories. Brent crude <LCOc1> was up $1.09, or 2.4%, at $45.52
a barrel, while West Texas Intermediate <CLc1> oil rose $1.11 cents, or 2.7%, to
$42.83 a barrel.
(Reporting by Dhara Ranasinghe; Additional reporting by Swati Pandey in SYDNEY
and Olga Cotega in LONDON; Editing by Andrew Cawthorne and John Stonestreet)
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