Spot gold hit a record high of $US1,945.16 per ounce, and rose 1.8 per cent to $US1,934.62 by 1738 GMT. US gold futures settled up 1.8 per cent to $US1,931.
Silver also rallied, jumping as much as 8 per cent to $US24.57, its highest since August 2013, and was up 6.9 per cent at $US24.31 per ounce.
“The dollar is losing its safe-haven appeal and you’re going to continue to see gold surge as the dollar sinks,” said Edward Moya, senior market analyst at broker OANDA.
“Everything is clicking for gold. There are high prospects the Federal Reserve is going to ramp up their efforts to repair the economy and the virus uncertainty is going to mean that the stimulus trade is going to remain.”
The dollar index hit a two-year low on the US-China tensions and concerns about the US economy as COVID-19 infections show no signs of slowing in the world’s largest economy.
Gold has risen 28 per cent so far this year, marking a shift from before the pandemic, when the bullion had to compete with other safe havens such as the dollar, especially amid Sino-US tensions, which had limited inflows into gold.
China on Monday took over the premises of the US consulate in the southwestern city of Chengdu in retaliation for Beijing’s ouster last week from its consulate in Houston, Texas.
US Senate Republicans are expected to unveil a $US1 trillion coronavirus aid package. Investors will also eye the US Fed’s meeting starting Tuesday, where it could flag another accommodative policy shift.
Non-yielding gold is considered a hedge against inflation and currency debasement, with analysts also pointing to massive inflows into gold-backed exchange traded funds as a driver behind its rally.
“A cure for COVID-19 has the potential to revive global risk sentiment and turbocharge investor confidence,” FXTM analyst Lukman Otunuga said.
“The tidal wave of optimism from such a positive development could send market players sprinting towards riskier assets at the expense of safe-havens.”
Platinum rose 2 per cent to $US932.33 per ounce and palladium jumped 3.4 per cent to $US2,295.29.
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