Gold soared to an all-time high and the dollar weakened to a multiyear low on concerns that a resurgent coronavirus and rising tensions with Beijing could hit recovery in the world’s biggest economy.
The price of the precious metal, which investors typically view as a haven in times of uncertainty, climbed as much as 2.2 per cent to a record $1,944.71 per troy ounce on Monday. Its value has jumped by more than a quarter this year, making it one of the best-performing asset classes.
Gold has rallied in recent sessions as doubts have deepened over the prospects for a smooth economic recovery. The US reported a total of 62,000 new coronavirus cases on Sunday with states including Florida, Tennessee and Arizona recording the highest number of new cases per million people.
European markets fell in early trading, with the regional benchmark Stoxx index slipping 0.3 per cent and London’s FTSE 100 down 0.2 per cent — weighed down by significant losses for airlines after the UK warned on travel to Spain.
“This weekend we perhaps got a glimpse of how challenging life will be this winter without a vaccine,” said Deutsche Bank strategist Jim Reid, pointing to rising case numbers in the US and parts of Europe and Asia.
The jump for gold came as the dollar lost ground against a swath of currencies. The dollar index, which measures the currency against a basket of trading peers, fell as much as 0.5 per cent to its lowest level since June 2018.
“Clearly the US dollar is really being questioned very openly. The question is: If you’re negative the dollar what are you positive on?” said Robert Rennie, global head of market strategy at Westpac. “Gold is the one asset market that is really reflecting heightened risks from rising geopolitical tensions.”
Tension between the US and China was heightened at the weekend by the arrest of a Chinese researcher who American authorities said had been hiding in the country’s San Francisco consulate. Washington has alleged the researcher is a member of the Chinese military.
“The China hawks in the White House are . . . doing all they can to burn bridges to reach a point of no return in US-China relations to ensure there can be no detente-style backsliding under a potential Biden administration,” said Michael Every, global strategist at Rabobank.
Qi Gao, a currency strategist at Scotiabank, said that tit-for-tat closures of consulates in Houston and Chengdu last week had stoked tension to the point that it had weighed on the US currency. “In the coming weeks you’ll see the dollar weakening further,” he added.
The dollar’s weakness came ahead of a meeting by the US Federal Reserve’s rate-setters on Wednesday. Traders expect that the central bank will keep interest rates at close to zero.
Republicans are set to unveil their proposals for a new round of stimulus later on Monday. Existing benefits, passed at the start of the coronavirus crisis in March, are due to expire at the end of the month.
The Japanese yen, another perceived haven, strengthened 0.6 per cent to a four-month high of ¥105.50 per dollar. The pound rose 0.2 per cent to $1.2823 and the euro gained 0.4 per cent to $1.1704.
Asian equity markets were mixed. China’s CSI 300 index of Shanghai and Shenzhen-listed stocks added 0.5 per cent while Hong Kong’s Hang Seng slipped 0.3 per cent. Japan’s Topix index rose 0.3 per cent as traders returned from a long weekend.
US government bonds rose slightly as investors moved into the debt.