Gold keeps its shine as investors shun dollar

Gold pressed further higher on Wednesday after breaking the $2,000 milestone and global stocks rose as upbeat data from Europe counterbalanced a less optimistic report from the US labour market.

The precious metal has risen for 13 days in the past 14, and a 1.1 per cent gain led it to a fresh all-time high of $2,040 a troy ounce. Silver followed in gold’s slipstream with a fourth day of records, rising 3.7 per cent to $26.95 to bring its 2020 increase to more than 50 per cent.

The gains came as some investors grew nervous after several months in which the stock market has recovered most of its losses, and the yield on government debt in the most economically advanced countries fell towards zero.

“Markets have discounted so much good news that valuations are looking stretched, whilst downside risks to earnings remain,” said Luca Paolini, chief strategist at Pictet Asset Management. “Bonds look even more expensive, offering the worst value in two decades. Gold is at all-time highs but strong fundamentals and demand for diversifying assets imply further gains.”

In New York the S&P 500 index rose 0.6 per cent, even after a report revealed that the private sector created fewer jobs than expected last month. The tech-heavy Nasdaq rose 0.5 per cent to close within two points of 11,000 for the first time.

The Vix volatility index, nicknamed Wall Street’s “fear gauge”, fell 2.7 percentage points to 23, its lowest level since mid-February. The index uses derivatives prices to measure expected swings in the S&P 500 over the next 30 days.

US government bond yields rose after the Treasury department announced it would boost issuance to fund the record-setting relief packages passed by Congress since March, as well as the new stimulus programme currently being debated by legislators. 

The yield on the 10-year US Treasury note rose 3 basis points to 0.54 per cent. Rising yields suggest the price of the debt has fallen.

Non-farm private employers added 167,000 jobs in July, said payroll processor ADP, indicating the recovery in the labour market has slowed as coronavirus cases have risen in the south and west of the US. June’s figures were revised upwards.

ADP’s data are seen as a harbinger of the government’s official monthly employment report, due at the end of this week. President Donald Trump told the Fox News channel there will be “another big job number on Friday”.

Europe’s benchmark Stoxx 600 index rose 0.5 per cent while London’s FTSE 100 rose 1.1 per cent.

A batch of positive data helped to buoy market sentiment in the region. Eurozone retail sales returned to pre-crisis levels while Spanish and Italian services sector activity picked up as government lockdowns eased in July and people returned to bars and restaurants.

Resurgent coronavirus cases and localised lockdowns, however, have kept markets and economies on tenterhooks. Many analysts see haven assets, such as gold and sovereign debt, set to maintain the momentum as the global economic outlook sours.

Oil prices advanced for a fourth day, with Brent crude rising as much as 4 per cent to $46.06 a barrel. That put the price of the global benchmark back to March levels, a time when Saudi Arabia initiated a price war with Russia. The price dropped to as low as $15.98 on April 28, the darkest days of the global pandemic lockdown. But Brent crude is still 31 per cent lower this year.

In Asia-Pacific, stocks were mixed. Australia’s S&P/ASX 200 dropped 0.5 per cent while Japan’s Topix index and China’s CSI 300 of Shanghai and Shenzhen-listed stocks finished the session flat. Hong Kong’s Hang Seng added 0.6 per cent.

Additional reporting by Colby Smith in New York