Gold surges to record on signs of progress for new US stimulus

LONDON: Spot gold rose to a record as speculation increased that U.S. lawmakers would move forward on a stimulus bill.
Investors are closely monitoring efforts in Washington to negotiate a new coronavirus relief package that many see as key to keeping the economy afloat as the pandemic curbs activity. The pressure is building, with the Senate set to leave on a break Friday, when crucial jobs data is due. Senate Democratic leader Chuck Schumer said Tuesday that the U.S. Congress was moving in the right direction on stimulus talks and he was still hopeful of getting a deal.
“What Schumer was saying suggests we will get a package and reverse the sudden stoppage of benefits. This help stocks and gold,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets. “It means the Treasury will borrow trillions more which someday we will have to repay.”
Spot gold rose as much as 0.8% to $1,994.47 an ounce, an intraday record, and traded at $1,992.67 as of 11:03 a.m. in New York. Bullion for immediate delivery surged 11% in July, the biggest monthly gain since 2012.
Gold has been rallying as investors weigh a weaker dollar and record low U.S. real yields. The health crisis has prompted unprecedented amounts of stimulus being unleashed to shore up economies including lower rates, which are a boon for non-interest-yielding gold. Simmering geopolitical tensions are also boosting demand.
Even as gold hit new highs, there are plenty of forecasts for further, substantial gains. Goldman Sachs Group Inc (NYSE:GS). says gold may climb to $2,300 as investors are “in search of a new reserve currency,” while RBC Capital Markets puts the odds of a rally to $3,000 at 40%.