Gold is rebounding, with Comex futures climbing back to $2,000 an ounce, as the dollar extended its slump and investors bet U.S. interest rates would stay lower for longer.
The dollar dropped to the lowest in over two years, fueling a broad advance in commodities. Spot gold gained more than 3% over the past three sessions, following its first monthly loss since March, as the Federal Reserve’s new approach on inflation added support. That came after a slowdown in buying from bullion-backed exchange-traded funds raised concern that a key driver of the metal’s record rally may be losing momentum.
Bullion is benefiting from the dollar’s weakness coupled with continued risk hedging, and a breach of the $2,000 mark will “fan the flames of interest,” said Rhona O’Connell, head of market analysis for EMEA and Asia regions at StoneX Group Inc.
“For the longer term, the persistent risks to the economic and financial environment, along with excess liquidity in the system, will underpin professional investment as cash looks for a home.”
Comex gold futures for December delivery touched $2,001.20 an ounce, the highest since Aug. 19. Spot gold rose 1.1% to $1,989.68 an ounce at 12:51 p.m. in London. The Bloomberg Dollar Spot Index fell 0.4% to the lowest since May 2018.
Bullion has soared more than 30% this year, and hit the highest ever in early August amid massive stimulus aimed at reviving economies hit by the coronavirus pandemic.
The metal’s rally took a breather after an uptick in real rates and as investors booked profits, switching to riskier assets amid hopes for a coronavirus vaccine.
Investors are watching the race to produce a Covid-19 vaccine, with AstraZeneca Plc starting a large-scale human trial of its inoculation in the U.S. Adding to risk-on sentiment, a private gauge of China’s factory activity grew at the fastest pace in August since 2011.
Only about 1 million ounces of gold were added to ETFs in August, lagging behind the monthly average increase of 3.57 million ounces from January through July, preliminary data compiled by Bloomberg show.
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