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Gold soars to record high, stocks stay uncertain

Stock MarketsJul 27, 2020 05:41AM ET
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3/3 © Reuters. Chinese and U.S. flags flutter in Shanghai 2/3

By Marc Jones

LONDON (Reuters) - Gold soared to an all-time high on worsening ties between China and the United States, a weakening dollar and ultra-low interest rates on Monday, while stock markets looked uncertain before a corporate earnings deluge.

Europe's equity markets saw a subdued start, perhaps still hurting after their first weekly drop in four and as the euro's fastest gains since early 2016 took it through $1.17 [/FRX], but it was the precious metals surge that dominated.

Gold rose another 1.6% to a record high of $1,943 per ounce, surpassing its gains in September 2011. Silver climbed another 5.5% to take its July streak past 30%, which would be its best month on record.

A lot of factors were in play for markets, said Shafali Sachdev, the head of FX Asia at BNP Paribas (OTC:BNPQY) Wealth Management in Singapore, from U.S.-China tensions to a second wave of coronavirus outbreaks.

"If you look at the fact that the dollar's been higher yielding than many other currencies for quite a while, and with some of the benefits of that being eroded ... and also the continued demand for a safe haven, it all plays into gold's strengthening," she said.

"And at this point there doesn't seem any obvious factor that could help the trend to draw to a close."

European stocks cut some of their early losses after data from Germany showed an improvement in business morale, but it was going to be an effort to get out of the red.

Travel and leisure stocks were down 3%, with UK-based airlines and tour operators such as TUI AG,, Easyjet, British Airways owner IAG (LON:ICAG) falling 8% and to 13.5% after Britain imposed a 14-day quarantine on travellers returning from Spain, where coronavirus cases are rising again.

Asia was also choppy. A 10% rally in Taiwanese chipmaker TSMC helped some other tech shares across the region, after U.S. rival Intel (NASDAQ:INTC) saw its shares plunge more than 16% on Friday.

"Chipmaking machine makers may see reduced demand from Intel for now, but as the jump in TSMC shows, markets are not pessimistic about the semiconductor industry," said Yasuo Imanaka, chief analyst at Rakuten Securities.

Elsewhere, mainland Chinese shares gave up most of their early gains, with the CSI300 index closing up just 0.2%, after steep losses on Friday.

Japan's Nikkei fell 0.2%, though S&P500 futures steadied and were last up 0.4% in Europe. (N)

Global shares had lost steam late last week after Washington ordered China's consulate in Houston to close, prompting Beijing to close the U.S. consulate in Chengdu.

U.S. Secretary of State Mike Pompeo said Washington and its allies must use "more creative and assertive ways" to press the Chinese Communist Party to change its ways.

"U.S. President (Donald) Trump used to say China's President Xi Jinping is a great leader. But now Pompeo's wording is becoming so aggressive that markets are starting to worry about further escalation," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities.

Graphic: Gold soars, dollar dips - https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrkrzlpe/Gold%20all-time%20high.png

MORE STIMULUS

One key for markets this week will be earnings releases from the world's main tech companies. Facebook (NASDAQ:FB) reports on Wednesday, and Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL) are all due.

Hopes for a quick U.S. economic recovery are fading as coronavirus infections showed few signs of slowing. That means the economy could capitulate without fresh support from the government, with some of the earlier steps such as enhanced jobless benefits due to expire this month.

Investors hope U.S. Congress will agree on a deal before its summer recess. U.S. Treasury Secretary Steve Mnuchin said the package will contain extended unemployment benefits with 70% "wage replacement" -- but there are some sticking points.

Democrats, who control the House of Representatives, want enhanced unemployment benefits of $600 per week to be extended and look to much bigger stimulus compared with the Republicans' $1 trillion plan.

Concerns about the U.S. economic outlook have also started to weigh on the dollar. The dollar index dropped 0.5% to its lowest level in nearly two years.

The euro gained 0.5% to $1.1711, hitting a 22-month high, after a European agreement on a recovery fund last week supported sentiment toward the common currency.

Against the yen, the dollar slipped 0.5% to 105.605 yen, a four-month low while the British pound hit a 4 1/2-month high of $1.2832.

Oil prices were capped on worries about the worsening Sino-U.S. relations.

Brent futures slipped 0.05% to $43.32 per barrel. U.S. crude futures were flat at $41.29.

"The pressure is building on politicians to provide more stimulus as the Covid-19 outbreak continues across the Americas, with a second wave unfolding in Europe and Asia" said Jeroen Blokland, portfolio manager at Robeco.

Gold soars to record high, stocks stay uncertain
 

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Comments (17)
Peter Dikeakos
Peter Dikeakos Jul 27, 2020 7:28AM ET
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Records are made and records are broken. Soon.....when silver and gold double in price people will be selling silverware and gold pendants to buy essentials. You know !
Luke Aye
Luke Aye Jul 27, 2020 6:31AM ET
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Gold says war is coming.
Mojeeb Ullah Hafiz
Mojeeb Ullah Hafiz Jul 27, 2020 5:22AM ET
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What do you think about gold is that still going high or no?
Caleb Wu
Caleb Wu Jul 27, 2020 5:22AM ET
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target price 2,000 .You'll see.
Gerald Zhang
Gerald Zhang Jul 27, 2020 5:22AM ET
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20000
Vv Pp
Vv Pp Jul 27, 2020 3:11AM ET
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Donald is still president?? really now? Donald? lol
Luke Aye
Luke Aye Jul 27, 2020 2:26AM ET
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CCP bots are here.
Gobo Fraggle
Gobo Fraggle Jul 27, 2020 2:26AM ET
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Pu pu platter please
David David
David9 Jul 27, 2020 2:26AM ET
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Who is CCP bot? Explain yourself...we waiting...
Kristof Naessens
Kristof Naessens Jul 27, 2020 2:03AM ET
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Forget about the US-China tensions and Covid, even without gold would be going higher. Two important things are key driver for precious-metal prices, the money printing in the trillions by central banks all over the world, and real negative interest rates. You can't print gold, and with negative yielding bonds, gold looks like a good way to preserve your wealth. The mining stocks will be the new Tesla, apples... for the next years!
David David
David9 Jul 27, 2020 1:58AM ET
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Looks like Intel will bow out of chips in the future...that just means China will eventually take over the chips. China is spending $1.5T on chips so that will help speed them up in the next year or two to become number 1.
Edward Chong
Edward Chong Jul 27, 2020 1:58AM ET
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david wong if only china produces chip. i assure u i wont use my mobile phone anymore.
Gamer Turtle
GamerTurtle Jul 27, 2020 12:48AM ET
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crashing dollar along with qe infinity...
John Pat
John Pat Jul 27, 2020 12:02AM ET
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You forgot to mention in your article that Gold is hitting record highs because the dollar is crashing
Rodolfo Barraco
Rodolfo Barraco Jul 27, 2020 12:02AM ET
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He did mention dolar crashing and thats why you habe to buy gold(because usd will crash) economy 101
Peter BullMarket
Peter BullMarket Jul 27, 2020 12:02AM ET
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Yes, but not entirely. Gold is also at record high in any other currency. Even in Euros
Chris Garcia
Chris Garcia Jul 26, 2020 11:49PM ET
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Gold to $2500+ and Silver to $30-50+ by the election. Get in now before we go to the MOON!
Benish Bebere
Benish Bebere Jul 26, 2020 11:49PM ET
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it will take time to cross $2500+.atleast 6months more.take my words.
alex gallegos
alex gallegos Jul 26, 2020 11:49PM ET
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At the rate gold and silver is accelerating NOW I'm on board and my seat belt is fastened tight!!
Plopseven Schwartz
Plopseven Schwartz Jul 26, 2020 11:34PM ET
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Anyone care to comment on the US Dollar falling off a cliff at an accelerating rate, day after day?
Rodolfo Barraco
Rodolfo Barraco Jul 26, 2020 11:34PM ET
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Its call monetary emission, thats why gold goes up. Red economy...
Optimum Zynokredz
Optimum Zynokredz Jul 26, 2020 11:29PM ET
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Indices are up not down ******bro?
Tommy Arencibia
Tommy Arencibia Jul 26, 2020 10:45PM ET
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Same articles, lame at that. And over dramatic.
Notvery Goodathis
Peteymcletey Jul 26, 2020 10:11PM ET
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Can I roll my eyes?
Peemil Nicho
Peemil Nicho Jul 26, 2020 10:06PM ET
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more retreat of dollar mean poor economics that made by T
Peemil Nicho
Peemil Nicho Jul 26, 2020 10:06PM ET
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failure management of both people health and money.
Kaveh Sun
Kaveh Sun Jul 26, 2020 9:57PM ET
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Didnt publish the same article last week?
Tricky Dick
TrickyDick Jul 26, 2020 9:00PM ET
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In 4 hours, stocks surge on Vaccine Hopes, Upbeat Earnings and Trump and Xi wish each other a nice day!
Edward Chong
Edward Chong Jul 26, 2020 9:00PM ET
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haha yes. dow hit 30k too in your dreams.
Luu Hung
Luu Hung Jul 26, 2020 9:00PM ET
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Edward Chong sup chinese?
Iwan Chandra
Iwan Chandra Jul 26, 2020 9:00PM ET
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Luu Hung what are you??
 
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