Photo by Jacqueline Gerson
Gold is at its highest since October 2012
This dramatic increase is linked to the likelihood of a second wave of the COVID-19 pandemic hitting the globe, as well as growing uncertainty following China’s release of a blueprint for the Hong Kong national security law.
Gold, considered a safe haven, was further reinforced over the weekend as COVID-19 cases continued to surge. Germany’s R (reproduction) number rocketed from 1.79 to 2.88, whilst cases across the US multiplied. Australia is similarly anticipating a second wave of cases and is strengthening existing public health measures across some of the country’s largest states. On Sunday the 21 of June, the World Health Organization announced a record number of almost 9 million cases globally.
COVID-19 aside, recent geopolitical developments have also given gold a significant boost. China has now confirmed the proposed changes to the national security law that would leave Beijing in a position to override Hong Kong’s legal system, potentially increasing existing friction with the US government. The legal developments could be implemented a lot sooner than expected, with the National People’s Congress Standing Committee announcing a rare decision to host a second meeting between the 28th and 30th of June.
Investor sentiment further soured after two US Federal Reserve officials announced that the country is likely to experience another rise in unemployment, if the pandemic is not brought under control. The country’s road to economic recovery is expected to be longer and more challenging than initial expectations.
Over the course of 2020 gold has increased by 15%, with Goldman Sachs anticipating that the metal will hit a record $2 000/oz. This forecast is supported by JPMorgan, who are advising investors to choose gold as the most effective option in a low real-yield environment.
Market experts have recently been a little more optimistic as the majority of economies are now in the post-peak period, however, it is becoming more and more obvious that the world will have to deal with a second wave of lockdowns that will trigger further economic challenges.
According to Bloomberg, total known holdings in gold-backed exchange-traded funds increased by 30 tons on Friday June 19, 2020. Similar, but less pronounced trends are visible on the silver, platinum and palladium markets.