New York (CNN Business)Gold prices continued their scintillating run Wednesday, rallying yet again to hit an all-time high of above $1,950 an ounce.
A new record above $2,000 seems inevitable — and investors can thank stimulus from the Federal Reserve, low bond yields and a weakening US dollar for that.
Gold has surged nearly 30% in 2020. Traders have flocked to gold and other precious metals as the value of the US dollar has slid. Silver prices are up about 35% this year to about $24 an ounce.
The dollar has fallen more than 3% against other major currencies this year as the Fed slashed interest rates to zero. It is expected to keep them at that level for the foreseeable future.
“When rates are at zero, gold is better than having money saved in the bank,” said Ed Keon, chief investment strategist and managing director of QMA in an interview with CNN Business. “Historically, gold is a good hedge during times of volatility and uncertainty.”
Fed stimulus has hurt the dollar and lifted gold
Along those lines, much of gold’s drop has taken place since the Covid-19 outbreak slammed the US economy to a halt. The dollar has plummeted nearly 10% since late March.
Gold tends to do well at times when the dollar is weak. The plunging dollar has also helped push yields on long-term US government bonds to near record lows of around 0.6%.
The greenback and Treasuries are often the safe haven of choice for nervous, conservative investors.
But now that returns on currencies and bonds are so minimal, many have flocked to gold and silver instead — especially as worries mount about a weakening global economy and more Covid-19 cases in parts of the US.