The gold price hit a new record high on Thursday, above $A2000 per ounce.
Geopolitical tensions, anticipated cuts to interest rates in the United States and the purchase of gold by central banks have helped push the price of gold past the $A2000 mark for the first time.
And analysts believe factors are in play that could keep supporting the gold price over coming years, with rising demand for the precious metal coinciding with falling supply.
The surge in the gold price, which on Thursday afternoon traded above $A2013 per ounce, provoked a jump in the share prices of ASX-listed Australian gold miners to new all-time highs, or multi-year records.
Evolution Mining, which has a market capitalisation of about $7.5 billion, jumped 7.1 per cent to close at $4.39, a new record closing price high. While shares in Australia’s biggest gold company, Newcrest Mining, jumped four per cent to close at $31.78, its highest closing price in more than seven years.
Gold helps foreign banks diversify their foreign-exchange assets, such as US dollars, during times of heightened political instability.
Jason Aravanis, IBISWorld senior industry analyst
„However, rising concern that the US-China trade war could lead to weakness in financial markets is leading some investors to take this step to reduce risks,“ he said.
Mr Aravanis said central banks added 651.5 tonnes of gold to their coffers last year, a 74 per cent jump on the previous year and the biggest amount bought in almost 50 years.
„Gold helps foreign banks diversify their foreign-exchange assets, such as US dollars, during times of heightened political instability. We expect central bank gold purchases to increase to over 700 tonnes in 2019-20,“ he said.
CBA commodities strategist Vivek Dhar said the most critical recent factor pushing up the price of gold was signalling from the US Federal Reserve.
„Market expectations of a rate cut increased. And the reason why that’s so important, is that gold competes with your safe haven assets,“ he said.
„So whenever you have interest rates being cut, the appeal of a US interest bearing security falls and gold looks more attractive, relatively“ he said.
The Reserve Bank of Australia cut the cash rate by 25 basis points to a record low of 1.25 per cent in early June, and has signalled that further rate cuts are imminent. While in the United States, markets are expecting a rate cut in July.
„The important aspect of this run higher is that it’s breaking through important technical resistance levels, so we’ve also got technical impetus adding to that fundamental shift in monetary conditions,“ said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty.
„Throw in a weakening U.S. dollar, we’ve got every reason to expect a good performance from gold.“
By Darren Gray, June 20, 2019, at 6:39 p.m.