Gold Eyes Record Highs On Recession Concerns As U.S Yields Sag

Gold has been on an impressive run, surging to nine-year highs amid a spike in risk sentiment in the market. The precious metal has already taken out the $1800 an ounce level as the upward momentum continues to gather steam .

Gold Explosive Run

A 10%  plus surge since the start of the year attests to growing investor’s confidence about the gold outlook and long term prospects. A number of factors could be attributed to the meteoric rise. Top on the list is the COVID-19 pandemic that continues to cause havoc around the world, fuelling demand for safe-havens. The disruptions caused by the epidemic has forced traders to shun risky assets in favor of safe-havens.

Likewise, growing concerns about the global economy’s health also continues to fuel bullish tone around the Bullion. A number of global economies have already contracted,  sinking deeper into recession on various sectors of the economy coming to a halt in the aftermath of the COVID-19 pandemic. Similarly, gold has emerged as a favorite spot for investors wary of the global economic recession.

U.S Yield Sag impact

In recent weeks,  sagging real yields in the U.S  Treasuries also appears to be fuelling demand for gold. U.S yields edging lower with the cutting of interest rates to record lows has once again made gold an attractive investment tool in the capital markets. The U.S ten-year yield remains anchored  in a relative tight range alluding to investors shunning yield in favor of safe-havens such as gold.

After the recent breakout past the $1800  level, gold remains bullish and likely to continue edging higher, given the developments around the world. Concerns about surging government debt levels, fuelled by stimulus plans as well as plunging real bond yield should continue to support the bid tone around the precious metals.

In addition, the potential impact of rising coronavirus cases and deteriorating economic forecasts should continue to strengthen traders’ sentiments on gold as a safe-haven. U.S Global Investors analyst Frank Holmes expects gold prices to hit an all-time high over the next 12 months, with $1920 emerging as the next target.

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