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Gold Nears 8-Year High Close as Markets Eye Further Stimulus

Published 20/05/2020, 16:37
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By Geoffrey Smith 

Investing.com -- Gold prices were on course for their first close over $1,750 an ounce since 2012 on Wednesday, supported by hopes of further monetary policy loosening around the world that continues to channel money out of bonds and into bullion.

By 11:30 AM ET (1530 GMT), gold futures for delivery on the Comex exchange were up 0.3% at $1,751.45, albeit some $6/oz below their high for the day. Spot gold was up 0.3% at $1,749.63 an ounce.

Prices were also supported by the weakness of the dollar, which fell to its lowest level in nearly three weeks as confidence in a global economic recovery in the second half of the year encouraged flows back into other currencies.

While U.S. interest rate futures are no longer pricing in negative U.S. interest rates, having harkened to the repeated guidance of Federal Reserve Chairman Jerome Powell, there are increasing signs of the U.K. following its European neighbors below zero in the near future. Bank of England Governor Andrew Bailey said in a speech earlier that negative rates weren’t ruled out, echoing recent comments by fellow policy-makers.

Silver again outperformed, rising above $18 an ounce for the first time since late February. By 11:30 AM ET, silver futures were up 0.9% at $18.07 an ounce, while hopes of an industrial rebound also propelled copper up 1.8% to $2.46 a pound, its highest in over two months.

Analysts at Capital Economics argued in a research note that the outlook for industrial demand is still key for silver, even its share of overall demand for the metal has fallen since the Great Financial Crisis in 2008.

“The silver price is still influenced by the price of industrial metals, albeit by less than in the past. Going forward, we expect this to continue to be the case,” analyst Alexander Kozul-Wright wrote. “Around 50% of silver demand stems from its industrial uses. This compares with less than 10% for gold.”

Kozul-Wright also acknowledged the increasing role of gold prices as a factor in silver pricing. With Wednesday’s price action, the ratio of gold-silver prices has fallen further below 100 and back toward its historical range of 60-80.

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