The price of gold hit an all-time high, hitting $ 1,943 an ounce, as concerns over issues such as the coronavirus pandemic as well as U.S.-China tensions weighed on investor sentiment.
The spot price of gold eclipses the previous record price set in September 2011.
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“While we believe that gold will continue to be supported by rising geopolitical tensions, in our opinion the main drivers of the price of gold are its negative correlation with real interest rates and the dollar,” he said. UBS chief investment officer Mark Haefele told clients on Monday.
The movement in precious metal prices came as tensions escalated between Washington and Beijing. China announced on Friday that it had ordered the United States to close its consulate in Chengdu, after the United States demanded the closure of the Chinese consulate in Houston.
Prior to that, Secretary of State Mike Pompeo also criticized China in a speech Thursday. He said Washington would no longer tolerate Beijing’s attempts to usurp the world order.
In a note released ahead of the new highs, Vivek Dhar of the Commonwealth Bank of Australia said falling 10-year US Treasury yields were the “biggest driver” for gold.
“When US long-term real yields rise, gold is less attractive than interest-bearing securities because gold has no capacity to generate income,” said Dhar, commodities analyst mining and energy within society. “The decline in real 10-year yields in the United States is mainly due to an increase in 10-year inflation expectations in the United States.”
Johan Jooste of the Global CIO Office told CNBC’s “Street Signs Asia” on Monday that “the opportunity cost of holding gold is virtually zero” with Treasury yields at their current lows.