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Gold shines on falling dollar, yields; global stimulus supports shares

Stock MarketsAug 05, 2020 03:05AM ET
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2/2 © Reuters. FILE PHOTO: Security guard wearing a face mask walks past the Bund Financial Bull statue on The Bund in Shanghai 2/2

By Swati Pandey

SYDNEY (Reuters) - Gold scaled a new high on Wednesday as a weaker dollar and falling bond yields burnished its safe-haven appeal, while shares ticked higher as investors turned their focus to stepped-up monetary and fiscal support globally.

Spot gold jumped to a record high of $2,030.72 per ounce on Wednesday as bond yields hit new lows. Prices have soared about 33% this year.

Risk assets such as equities have surged in recent months on massive policy stimulus from central banks and governments, but gold has also rallied in a sign of heightened uncertainty around the long-term effects of the global health crisis.

European futures (STXEc1) started in green with Germany's DAX futures (FDXc1) up 0.4% and those for France's CAC40 (FCEc1) up 0.2%. Futures for London's FTSE (FFIc1) rose 0.37% while E-minis for the S&P 500 (ESc1) reversed early losses to climb 0.2%.

Analysts said equities would struggle a bit until the U.S. Congress agrees on a stimulus package and ahead of corporate earnings from tech giants later in the week.

White House negotiators have vowed to work "around the clock" to reach a spending deal by the end of the week.

Markets also latched on to comments from the president of Federal Reserve Bank of San Francisco that the U.S. economy will need more support than initially thought, sending long-term Treasury yields into a downward spiral.

"Failure to agree to another round of stimulus would hit the U.S. economy hard at a time when high-frequency data suggests it is losing some momentum," said Tapas Strickland, analyst at Melbourne-based National Australia Bank (OTC:NABZY).

The United States has reported more than 4.7 million coronavirus cases and over 157,000 deaths, the highest globally.

On Wednesday, MSCI's broadest index of Asia Pacific shares outside of Japan (MIAPJ0000PUS) rose 0.5% to a 6-1/2 month peak at 563.28 points.

Japan's Nikkei, off 0.3% and Australia's benchmark index (AXJO), down 0.6%, were notable underperformers in Asia while Chinese shares were mildly weaker though still near a recent five-year peak. (CSI300)

South Korea's Kospi <.KSII> bucked the trend to hit its highest level since October 2018.

On Wall Street, the Dow (DJI) had ended up 0.6% on Tuesday, the S&P 500 (SPX) rose 0.4% and the Nasdaq Composite (IXIC) added 0.4%.

"Significantly increased odds" of more monetary policy stimulus from the U.S. Federal Reserve is a key driver of equities although the rally has been reined in by stretched valuations, Mizuho analysts wrote in a note.

More central bank support is also dragging U.S. Treasury yields lower, led by the long-end of the curve, and helping "fire-up gold's glitter", they added.

GREENBACK UNDER PRESSURE

The dollar was under pressure with the safe-haven Japanese yen rising to 105.64 as the bond market's dim view of the U.S. recovery sent real yields further into negative territory and nominal yields near record lows. [US/]

The risk-sensitive Australian dollar has risen more than 2% so far this year while the euro (EUR=) has climbed over 5% against the greenback.

The Aussie was last up 0.3% at $0.7184 while the common currency was inching toward a two-year high at $1.1811, buttressed by hardening perception that the U.S. rebound is lagging Europe.

Investors are now waiting for an Aug. 15 video conference where senior U.S. and Chinese officials are set to review a trade deal and likely air mutual grievances, according to sources.

China's U.S. envoy on Tuesday said Beijing does not want tensions to escalate.

In commodities, oil prices reversed early losses with Brent crude (LCOc1) up 5 cents at $44.48 a barrel. U.S. crude (CLc1) added 2 cents to $41.72.

Gold shines on falling dollar, yields; global stimulus supports shares
 

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Comments (11)
Khaled Najjar
Khaled Najjar Aug 05, 2020 7:31AM ET
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In the first wave of covid 19 gold hits 2040 in the second wave it will reach 3600-4200
Jusuf Seferi
Jusuf Seferi Aug 05, 2020 4:55AM ET
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what need to happen for Gold start going down?
Ron Raymond
Ron Raymond Aug 05, 2020 4:53AM ET
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What's going on really behind this bull market is the rich getting richer off of those still dumping money into retirement funds, other funds, the Zacks and Fools encouraging to buy at high prices, etc. The big profit taking will be a big surprise and unstoppable drop just a the push up, however, there will not be the same recovery. America is eventually going basically bankrupt at this pace and heading towards disaster. Keep it up politicians and world war 3 will be here soon.
eddie glass
eddie glass Aug 05, 2020 2:04AM ET
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there is not any reason for the dollar to dump into November imo, if anything there would be upward pressure on the USD into the election. just my opinion, but i think right now is gold/silver euphoria, but this will reverse into the end of the year, with likely resumption of the uptrend next year. i think gold will correct to the 1700-1800 range, and silver to the 18-20 range. could be totally wrong. anybody's guess since the market has gone full las vegas pink sheets mode in every market.
Fabio falec
falec Aug 05, 2020 2:04AM ET
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I think that there will be correction in precious metals only of we'll have a sell-off in markets. If that won't occur until election, there is high possibly that usd keeps weakening. Especially if multiyear resistance breaches with the major currencies e.g. EUR
me ish
me ish Aug 05, 2020 2:04AM ET
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Fabio falec  indeed - the whole point is if the US keeps on creating funny money out of thin air whilst their economy is substantially weaker, gold is the hedge against the massive amounts of inflation that will appear later - on top of another oil price shock - as production has been and will continue to but back, so that it's overdone - then when there is a surge in economic activity in next two years, oil price inflation and the funny money printing will create extraordinary inflation - sending precious metals even higher - we are basically playing out the Seventies all over again.
eddie glass
eddie glass Aug 05, 2020 2:01AM ET
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this is my cue to dump my gold, and sit in cash for a while
Jack Drummond
Jack Drummond Aug 05, 2020 2:01AM ET
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please sell every crumb of gold that you managed to acquire
perplexed76 .
perplexed76 . Aug 05, 2020 12:31AM ET
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"while shares were mostly lower" means shares stopped rising 2-3% and rising just 0.2-0.3 everyday.
James Marshall
James Marshall Aug 04, 2020 11:59PM ET
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the illusion of Covid has created cover for the largest wealth heist in history and will continue to do so. follow the money.
Jay West
Jay West Aug 04, 2020 11:59PM ET
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James Marshall- what are you invested in?
eddie glass
eddie glass Aug 04, 2020 11:59PM ET
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people wonder how communism happens, look no further than the democrat party
Plopseven Schwartz
Plopseven Schwartz Aug 04, 2020 11:59PM ET
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eddie glass The FED are the biggest communist party on the planet. They dwarf the CCP.
Jack Drummond
Jack Drummond Aug 04, 2020 11:59PM ET
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eddie glass , hittin' the crack pipe again? the CCPC, not the CCP, folded in 1990. It is now called Russia. I really hope you sell your gold because maybe you'll no longer find need to publish blather.
Jack Drummond
Jack Drummond Aug 04, 2020 11:59PM ET
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eddie glass , communism takes hold when the power of the almighty dollar tempts the wealthy to maximize their footprint by walking over middle and lower income families. Low wages create the condition that 90% of the minimum wage workers cannot afford a one-bedroom apartment in their town. Greed, once recognized- it's the spark to overthrow the greed of the rich who has been paying protection money to their *****government minions- to maintain or grow their share of the economy. Monetary inequality is achieved by the corrupt. The average Joe simply refuses to continue suffering under this scheme. We are not a monarchy, we can replace our corrupt president and his Republican stooges by voting instead of overthrowing the government..... If Cadet Bonespurs permits it.
Chris Garcia
Chris Garcia Aug 04, 2020 11:22PM ET
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Gold is going to $2500+ and Silver $35-50+ by the election. Get in now before we truly MOON! The FED is only going to be printing more Fiat for the foreseeable future
Randall Wagner
Randall Wagner Aug 04, 2020 9:42PM ET
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With conditions and the economy improving everyday, it's no wonder that the market continues to rise.
Kons Ko
Kons Ko Aug 04, 2020 9:42PM ET
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Your drug dealer is good.
Franco Dominguez
Franco Dominguez Aug 04, 2020 9:09PM ET
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arvind ghodekar
arvind ghodekar Aug 04, 2020 8:59PM ET
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jobless growth with heavy debt how come, how many days equity bubble will sustain as money distribution is highly odd.
 
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