Several political and Covid-19-induced factors have resulted in the current gold rally, with the gold price having surged 12% in July and reaching new record levels that have been carried into August with gold tearing above $2 000/oz, says Refinitiv precious metals research director Cameron Alexander.
He says the current trend in the gold price is being driven by its safe-haven appeal as a result of the worsening economic conditions brought about by the Covid-19 pandemic.
Further supporting the rally is the fact that central banks around the world continue to inject stimulus to resuscitate domestic economies, which has led, in some cases, to currency devaluation especially dollar and lower interest rates, says Alexander.
Further, he points out that, during this time, tensions between the US and China have simmered, while US President Donald Trump’s controversial statements on the upcoming elections in the country kept the investors interested in gold.
“With all these factors in the backdrop, the journey of gold in August looks promising, but profit taking could lead to the consolidation of prices after such a rapid rally,” he warns.