Gold hits three-month high amid concerns over surging COVID-19 cases

·3-min read
Gold bars are pictured at the Ginza Tanaka store during a photo opportunity in Tokyo September 17, 2010.  Spot gold hit a new record high of $1,277.75 an ounce on Friday, as investors remained concerned about economic prospects. REUTERS/Yuriko Nakao (JAPAN - Tags: BUSINESS IMAGES OF THE DAY)
The commodity was also spurred by a dip in US Treasury yields and further evidence of global infection pressures. Photo: REUTERS/Yuriko Nakao

The price of gold (GC=F) hit a three-month high on Monday as traders turned to the safe-haven metal amid a surge in COVID-19 cases across Asia.

Spot gold climbed 0.6% to $1,854 (£1,314) per ounce after touching its highest level since 2 February, while US gold futures rose 0.8% to more than $1,853 per ounce.

The commodity was also spurred by a dip in US Treasury yields and further evidence of global infection pressures. Benchmark US 10-year Treasury yields slipped to their lowest in almost a week, reducing the opportunity cost of holding non-interest bearing gold.

Gold is seen as a hedge against rising inflation. Data compiled by Bloomberg showed exchange-traded fund investors have bought bullion for the past six days, following months of sales.

“Gold has been out of favour for a while, but the uptrend during the past six weeks combined with rising breakevens and lower real yields have supported renewed demand both from money managers in futures and from investors in general through ETFs,” Ole Hansen, head of commodity strategy at Saxo Bank, said.

The price of gold rose on Monday. Chart: Yahoo Finance
The price of gold rose on Monday. Chart: Yahoo Finance

The price surge came amid rising COVID-19 infections across Asia.

India is continuing to suffer from its second wave of the virus, reaching nearly 24.7 million cases on Sunday. It is the world's second-worst pandemic-hit country after the United States.

The spread of coronavirus in Singapore has also caused the country to shut most schools from Wednesday after reporting the highest number of local infections in months.

Meanwhile, Taiwan's government had to reassure investors it would stabilise stock and foreign exchange markets if needed amid a spike in COVID-19 cases, as well as imposing new curbs on gatherings and movement.

Margaret Yang, a strategist at DailyFX, said: "Treasury yields are falling and on the other hand, there seems to be fears about virus resurgence in Singapore, Taiwan and broader Asian-Pacific markets... driving up demand for safety.”

She added: “Inflation is going to be a strong driver behind gold in the short- and medium-term. There are always concerns about Fed tapering, but the latest non-farm payrolls report is helping to contain that fear.”

Read more: FTSE falls into the red as UK restaurants reopen indoors

Elsewhere, silver (SI=F) was up more than 1.2% at $27.70 per ounce, after hitting a one-week high earlier in the day, and platinum futures (PL=F) gained 0.8% to $1,232.80. Palladium (PA=F) edged 0.3% higher to $2,909.

The boost in prices comes after a recent rally in copper (HG=F) and iron ore on the back of strong demand for raw materials.

Just days ago spot iron ore broke $200 a tonne for the first time, while copper, which is seen as a bellwether of the health of the global economy, hit more than $10,200 per tonne in London.

The move pushed Bloomberg’s index of commodities prices to its highest since 2011.

"The long-term prospects for metals prices are 'too good' and point to higher prices in the next few years," Commerzbank AG analyst Daniel Briesemann said last week.

"The decarbonisation trends in many countries — which include switching to electric vehicles and expanding wind and solar power — are likely to generate additional demand for metals."

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