Gold price spikes to new record as stocks climb

The Australian share market lifted on Tuesday thanks to the precious commodity but analysts warn its value is linked to dire forecasts.

Australian shares rose Tuesday morning after gold prices soared to a record high overnight.

Investors rushed to the safe-haven commodity on fears escalating tension between the US and China coupled with spiking coronavirus cases would put a dent in global growth.

The price of gold reached an all-time high this morning of $US1963 ($A2745), propelling Aussie stocks nearly 1 per cent higher during early trade.

“Investors are normally reluctant to hold gold, as it doesn’t generate yield compared with stocks or bonds,” IBISWorld senior analyst James Thomson said.

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“However, the unprecedented economic disruption attributable to the COVID-19 pandemic has led to a surge in demand for safe-haven assets such as precious metals.”

Most asset classes have been severely disrupted by the virus crisis as populations are forced indoors, while the travel and transport industries remain grounded.

But gold production in Australia has been largely unaffected through the extraordinary period, with anticipations it will produce 372 tonnes of the precious commodity this financial year, about 10 per cent of total global output.

Gold prices have reached a record high as demand for the precious commodity increases.

Its surging value is “always a sign of trouble”, Spreadex analyst Connor Campbell warned, as it typically indicates a defensive move from investors who are abandoning other asset classes.

“Gold continued its red hot streak on Monday, the safe-haven commodity looking mighty attractive after another troubling weekend of COVID-19 and US-China headlines,” he said.

Coronavirus infection numbers in the US continue to soar as the death tally approaches 150,000 and its dollar weakened against other major currencies.

The fall in the US currency comes amid expectations the Federal Reserve will keep interest rates lower for longer and the economy could underperform those in other regions due to the virus.

“A further escalation of tensions between China and the US, with the tit-for-tat embassy closure, was the most obvious reason for the change in market tone,” said Rupert Thompson, chief investment officer at Kingswood.

“But the continuing uncertainties over the prospects for the economic recovery may also have contributed.”

The US economy remains in the grips of the horrific virus crisis. Picture: Johannes Eisele/AFP

The price of gold is tipped to rise further over the next five years as demand increases and supply becomes more scarce, IBISWorld’s Mr Thomson said.

“Demand for gold jewellery is expected to rise over the next five years, due to the middle class expanding in India, China and South-East Asia,” he said.

“At the same time, global gold production will likely stagnate due to the depletion of ageing mines in Russia, South Africa, Mexico and Australia.”

– with AFP