Gold Sets New Record High Price

Gold prices reached a new record high on Friday, boosting prices for gold-tracking ETFs. The yellow metal traded as high as $1,906.58/oz, before settling at $1,902.02, eclipsing the previous closing high set in 2011. Gold’s intraday high sits at $1,921.18, also set in 2011.

Spot Gold Prices

ETFs that own physical gold, like the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU), have returned 25% this year, in line with the gains in the underlying metal.

Investors have been piling into gold in 2020 to hedge against financial market and economic concerns. Some investors worry that the coronavirus could lead to a protracted period of economic weakness. Others worry that all the stimulus unleashed by global central banks could spur rapid inflation.

Gold is seen as a hedge against those possibilities—and others.

In the first six months of the year, investors around the world pushed $39.5 billion into gold ETFs, according to the World Gold Council—the largest amount deposited in the funds in any year. Those inflows are continuing in July; $4.2 billion has flowed into GLD and IAU since the start of the month, pushing the two funds’ combined year-to-date inflows up to $24.8 billion.

Bullish Catalysts

The U.S. 10-year Treasury bond yield dipped as low as 0.58% on Friday morning, just a hair above the record closing low of 0.54%. The five-year Treasury yield slipped below 0.26%, a record low.

Lower rates are seen as bullish for gold, which offers no yield, and competes with risk-free Treasuries as a safe haven.

Meanwhile, the U.S. Dollar Index fell to a two-year low on Friday as traders anticipated another massive round of fiscal stimulus from the U.S. government, which will be funded by borrowing. Rising debt, loose monetary policy and an underperforming U.S. economy have made the dollar less attractive versus its rivals.

Gold, which is denominated in dollars, becomes more affordable for overseas buyers when the buck weakens, lending support to prices.

US Dollar Index

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