The gold rush is set to continue after prices reached eight-year highs at the start of the month, breaking through US$1800 ($2603) an ounce for the first time since 2011.
The metal reached US$1810 before settling at US$1780 on July 1.
ASX-listed gold miners Newcrest Mining, Kirkland Lake Gold, Northern Star Resources and Saracen Mineral Holdings all responded to the price rise with an immediate uptick in share prices.
Edison Investment Research director Charles Gibson said there was no end in sight for the spikes.
“Gold, with its safe haven and monetary status, has been an obvious beneficiary of the current uncertain environment and that seems unlikely to change for as long as the coronavirus remains a largely unknown quantity,” he said.
Often viewed as the haven of last resort, the commodity has rallied in the wake of the pandemic, and the low interest rates and local and global economic slowdown it has triggered.
Crude oil price crash and US-Iran tensions earlier in the year also led to the notorious rise of gold prices.
Anticipating a further rally, some global research houses have revised their price targets for the precious metal. Recently, Goldman Sachs updated its three-, six- and 12-month gold price forecasts to from the earlier $1600, $1650, $1800 per oz to $1800, $1900, $2000 per oz, respectively.
But the house seems divided. “Some global commodity analysts are too bullish on gold. It has been observed in the past that after a brief rally, gold prices usually consolidate or see some cooling-off,” a commodity analyst said.
“A lot of the worries relating to the economic impact of coronavirus are already baked into gold prices,” he said.
This year so far, global gold prices have rallied nearly 15%. So, even if gold prices were to start rising again, they were unlikely to see a massive surge in one go.
Further, muted demand for gold jewellery, especially from key consumers India and China, could cap large gains in gold prices.
The corona crisis has led to huge job losses, impacting discretionary spending.
Lockdowns and social distancing norms have kept consumers indoors, thus impacting jewellery sales in India.
But those in the bullish camp expected excessive monetary easing by central banks and a weak US dollar to work in favour of gold.
Meanwhile, investment demand for gold has risen.
Credit Suisse said this was visible in ETF holdings trends, which has been rising for six successive months and has now crossed 100moz for the first time ever.”
