Gold Price Hits $1800 per Ounce... 'Highest in 8 Years'

Preference for Safe Assets Amid Concerns of COVID-19 Resurgence
Gold Sought as Inflation Hedge Amid Continued Low Interest Rates

[Asia Economy Reporter Naju-seok] The price of gold has surpassed $1,800 per ounce for the first time in eight years. Concerns that the resurgence of COVID-19 and the enforcement of the Hong Kong National Security Law could escalate U.S.-China tensions have driven demand for safe-haven assets, lending credibility to this analysis. Investment banks are also forecasting that gold prices could exceed $2,000.

According to the Wall Street Journal (WSJ) and others on the 30th of last month (local time), the August delivery price on the New York Mercantile Exchange rose 1.1% from the previous day to $1,800.5. On that day, gold prices reached as high as $1,804 per ounce during trading, marking the highest level since November 2011. It has risen 13.1% in the second quarter of this year alone.

Investors have also flocked to gold exchange-traded funds (ETFs). Gold ETF holdings are also at record highs.

The rise in gold prices reflects a preference for safe-haven assets amid economic uncertainty. Bloomberg reported, "With COVID-19 cases surpassing 10 million and still spreading, investors concerned about further economic fallout are buying gold as insurance." Peter Thomas, Senior Vice President at the Chicago-based brokerage Janer Group, said, "Demand for gold is explosive." He explained, "In investors' minds, factors such as COVID-19, inflation forecasts, and gold prices rising nearly 20% this year are driving gold purchases."

U.S.-China tensions have also fueled the rise in gold prices. The geopolitical instability has increased due to China passing the Hong Kong National Security Law and the U.S. retaliating in response. Investment banks expect gold prices to rise further. Goldman Sachs raised its gold price forecast last month. Initially, Goldman Sachs projected gold prices could reach $1,800 per ounce within the next 12 months, but last month it revised the forecast upward to $2,000 per ounce. Analyst Mihail Sprogis predicted, "Even if the economy enters a recovery phase, gold demand may continue in the early stages due to currency depreciation and low interest rates." The bank also added that if inflation persists, gold prices could reach $3,000 per ounce.

There is also analysis that low interest rate policies have fueled the rise in gold prices. Daniel Galli, commodity strategist at TD Securities, said, "U.S. Treasury yields are at rock bottom, and real interest rates are also at lows," adding, "From a broad perspective, gold is becoming an inflation-hedging asset." Philip Strible, Chief Strategist at Blue Line Futures, a futures trading firm in Chicago, said, "The Federal Reserve is pursuing an extremely accommodative monetary policy, and with lockdown measures continuing worldwide, additional monetary measures are expected." As liquidity flows into the market, the preference for gold could accelerate.