Gold futures headed higher Monday, supported in part by a weakening U.S. dollar, which was providing a runway for the commodity even as global stocks rallied.
The U.S. dollar was off 0.4%, as measured by the ICE U.S. dollar index DXY, -0.49%, a gauge of the buck against a half-dozen currencies. A weaker U.S. dollar can make assets priced in the currency more attractive to buyers using other monetary units.
Moves in the greenback came amid a broad rally in equities that has been attributed to a surge in Chinese markets. Beijing’s state-run media published a front-page editorial encouraging investors to buy stocks to support domestic markets.
Still, investors are wrestling with the climbing tally of new COVID-19 cases in the U.S., concentrated in a number of hot-spot states including Arizona and Florida.
“Bullion prices don’t typically jump because of social unrest or geopolitical strife. But if those stresses add to a financial crisis or economic slump,” gold prices can spiral higher, said Adrian Ash, director of research at BullionVault.
Against that backdrop, August gold GCQ20, +0.16% rose $2.90, or 0.2%, at $1,792.90 an ounce, after the most-active contract finished on Thursday around 0.5% higher for the holiday-abbreviated week, according to FactSet data.
Gold prices saw some pressure, briefly giving up earlier gains that had lifted prices to as high as $1,799 shortly after economic data released Monday showed that the Institute for Supply Management’s index of nonmanufacturing companies jumped to 57.1% in June from 45.4% in May.
That marked the single biggest increase since the survey was created in 1997. However, growth looked so strong because it occurred after a few months of extremely low activity.
It’s “hard to see what stops gold reaching new highs from here,” said Ash.
In a daily note, he explained that “last week’s swing towards 2011 levels in U.S. dollar terms near $1,800 per ounce is attracting a flood of new interest, piling on top of January-June’s heavy demand.”
“Fear of missing out could spur a dramatic spike [in gold] if the economic, health and political news continues to darken,” Ash said. “Heaven forbid we get a hot, angry summer to match 2011. But rarely have there been so many tailwinds for gold.”
“The economic slump caused by Covid-19 has spurred record government deficits and central-bank inflation to try and offset it,” he said. “China’s power grab in Hong Kong is worsening geopolitical tensions ahead of November’s U.S. election, with the U.K.’s looming no-deal exit from the EU now baked in the crust for December.”
Meanwhile, September silver SIU20, +1.87% rose 30 cents, or 1.7%, at $18.63 an ounce, after the metal put in a weekly gain of 1.6%.
Among other metals traded on Comex, September copper HGU20, +1.05% tacked on 0.9% to $2.7735 a pound. October platinum PLV20, +1.31% rose 1% to $840.10 an ounce and September palladium PAU20, +1.02% traded at $1,954.50 an ounce, up 1.4%.