Wednesday 5 August 2020 1:25 pm

Gold surges to new record on pandemic fears but 'can go higher'

The gold price reached a record high of $2,030 (£1,550) as investors’ caution pushed it higher, but analysts expect it to rise even higher.

A survey of more than 1,300 DIY investors conducted by BullionVault, showed they expect the price of gold to rise by 25 per cent by the end of 2020, taking it to $2,500.

Read more: FTSE 100 climbs and gold hits new high as investors bet on US stimulus

Gold soared to new highs yesterday as it benefited from continued uncertainty over the pandemic and the prospect of a second wave. The precious metal is currently up 34 per cent year-on-year.

“Investors rally to gold in times of uncertainty. The reason for this is simple – gold is a safe haven asset that is able to maintain, and indeed increase, its value during volatile periods,” said Giles Coghlan, HYCM’s chief currency analyst.

The price of gold has been buoyed by expectations of more fiscal and monetary stimulus. The precious metal is also seen as a hedge against inflation and currency debasement.

“The fact that private banks are encouraging their clients to buy gold as a means of hedging against inflation and currency fluctuations shows that the market is not confident that we have witnessed the end of the coronavirus outbreak,” added Coghlan.

The FTSE 100 edged higher this morning on gold’s ascent to $2,000. The rise boosted many London-based miners including Polymetal International which rose 4.7 per cent, while Fresnillo climbed 4.3 per cent.

Read more: Centamin first-half profit jumps on strong gold prices

Weakness in the dollar, which fell to two-year lows, and falling US yields have encouraged investors to look to gold as a safe haven. The five-year Treasury yield hit a record low on Tuesday and the benchmark 10-year yield fell to a five-month low at around 0.51 per cent.

“Gold’s status as a haven asset is in renewed focus, with some unease over whether markets have come too far too fast, deteriorating relations between the US and China and a potential second wave of the pandemic outside of the US giving investors some cause for concern,” said Richard Hunter, head of markets at Interactive Investor.

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