Gold Climbs to All-Time High, Topping 2011 Record -- 2nd Update

By Amrith Ramkumar and Joe Wallace

Gold prices rose to a new closing record for the first time since 2011, extending a summer surge fueled by nervous investors adding bullion to their portfolios as the coronavirus muddies the global economic outlook.

Most actively traded gold futures, for delivery next month, rallied 0.4% to $1,897.50 a troy ounce, climbing for the sixth consecutive session and eclipsing their August 2011 peak of $1,891.90. Gold came close to topping the high on Thursday and has risen steadily since the end of 2018, spurred by trade tensions and the pandemic pushing investors toward safer assets.

The coronavirus has ignited a global gold rush, with physical traders around the world trying to get their hands on more metal and individuals around the world ordering bars and coins. Even as stocks rally, many investors remain nervous about the pandemic and a host of geopolitical concerns ranging from the relationship between the U.S. and China to November's U.S. presidential election.

"It's a special time for precious metals where every factor seems to be moving in their favor," said Tai Wong, head of base and precious-metals derivatives trading at Bank of Montreal. "The market is uniformly bullish." He has been a metals trader for about 15 years and only remembers this much excitement in the sector following the financial crisis.

Investors have also been bidding up shares of gold miners such as Newmont Corp. and Barrick Gold Corp. And the price of silver -- gold's precious metal peer -- on Wednesday hit a nearly seven-year high above $23 a troy ounce, though it fell Thursday and Friday.

Expectations for the world's central banks and governments to continue flooding the global economy with cash are also lifting demand for bullion. Ultralow interest rates make gold more appealing because the metal offers no income simply from holding it. Many analysts also expect historic stimulus measures to eventually spur inflation, eroding the purchasing power of paper money and boosting the value of precious metals.

European Union leaders recently reached an agreement on more than $2 trillion in spending, and traders anticipate U.S. lawmakers will soon approve additional coronavirus aid.

"You couldn't create a better playbook for gold to perform," said Steven Dunn, head of ETFs at Aberdeen Standard Investments, which manages the roughly $2.2 billion Aberdeen Standard Physical Gold Shares ETF. Gold-backed ETFs have taken in billions of dollars in recent months.

Many big-name investors including Ray Dalio, Jeffrey Gundlach and Paul Tudor Jones have touted the benefits of owning the metal in recent months, with the pandemic stinging business activity and a global pile of debt expanding.

Li Chun Hang Henry, managing director of Emperio Group, a retail store for precious metals in Hong Kong, said sales were up around 70% this year.

Some customers say they are buying bars and coins because of low interest rates on bank deposits, others because they are concerned about tensions between the U.S. and China. "They are panicking," Mr. Li added.

On Friday, Beijing ordered the closure of the U.S. Consulate in the southwestern Chinese city of Chengdu, retaliating against Washington's decision earlier in the week to close China's Houston mission.

Traders are also keeping a close eye on physical gold markets that have been upended by the coronavirus. Demand for bars and coins started to wane in June as they became more expensive, while jewelry sales are stagnant. That has prompted refiners to send the metal to bullion banks in London, the buyers of last resort, according to refiners, traders and logistics providers.

Doing so remains expensive because of the lack of passenger flights, the main vehicle for transporting bullion around the world. Still, traders say flying gold is significantly easier now than at the onset of the pandemic, when bullion was fighting for cargo space with medical equipment and the closure of major Swiss refineries sparked fears of a shortage.

Gold has been prized for thousands of years going back to ancient societies in Sumer and Egypt and pursuit of the metal has shaped world history. Europeans followed gold to the Americas, and the discovery of gold at Sutter's Mill in California in the 19th century fueled westward expansion.

Gold has also been a fixture in financial markets for decades because it was used to determine the value of the U.S. dollar in a system that lingered until 1971, when President Nixon ended a fixed gold-dollar conversion price and let the dollar float freely against other currencies. Today, it is used for everyday items from jewelry to electronics and as an investment for money managers seeking a store of value during times of turmoil.

While analysts are cautious about a reversal following such a strong rally, traders say investors who normally don't trade gold are flocking to the sector, fueling the advance.

"This seems to be one of the trades that is a little bit of a no-brainer, " Bank of Montreal's Mr. Wong said.

Write to Amrith Ramkumar at [e-mail] and Joe Wallace at [e-mail]

Corrections and Amplifications

This article was corrected at 2:10 p.m. ET because it incorrectly said Mr. Nixon simply ended the gold standard in 1971. President Nixon ended a quasi gold standard involving a fixed gold-dollar conversion price, letting the dollar float freely against other currencies.