By Barani Krishnan
Investing.com - The bull run in precious metals showed little sign of slowing on Wednesday as the dollar fell its most in over a week, catapulting gold to a fresh record high above $2,070 an ounce and silver to a seven-year high exceeding $27.
“The gold trade just went from ridiculous to ludicrous speed,” Ed Moya, an analyst at New York’s OANDA, said, as U.S. gold futures tacked on a weekly gain of 4%, with another two days left to the trading week.
“The Treasury quarterly record bond issuance put an exclamation point on the belief the Fed will not raise rates for several years and that they will do more before the year ends,” said Moya. “Gold is about to benefit from another wave of inflows from the fixed income market. The search for yield is likely to see many investors just continue to add to their gold holdings.”
The front-month October gold futures contract on New York’s Comex settled up $28.60, or 1.4%, at $2,037.10. Its session peak of $2,057.50 set an all-new high for a benchmark gold futures contract on Comex.
Notwithstanding that, Comex’s December gold contract, which has attracted even more volume and open interest than October futures, surged to a record high of $2,070.30, before settling at $2,049.30, up $28.30, or 1.4% on the day.
Spot gold, which reflects metal available for immediate delivery, meanwhile, hit a record high of $2,055.79.
By analysts’ estimates, there are no clear ranges on how high gold could go before consolidating, though $2,150 to $2,200 did not seem an outrageous bet.
In silver, the front-month September contract on Comex settled at $26.89, up 86.2 cents, or 3.4%, on the day after scaling $27.242 earlier, its highest since April 2013. Bulls expect silver to hit $30 by the year-end.
With Wednesday’s rally, gold is up as much as 35% on the year while silver has gained almost 50%.
Market bears, meanwhile, are pointing to a top-heavy bubble-like trade that they say could pop soon despite the dollar cratering on the weight of plunging U.S. 10-year yields and real rates, as well as the issuance of more than $3 trillion in U.S. coronavirus relief funds since March.
Some say the next 48 hours, especially, are crucial to both precious metals and the dollar, with the U.S. Labor Department set to report on Friday job numbers for July amid continued recovery from the coronavirus pandemic. A positive nonfarm-payrolls report for last month, following through with the positive data of the previous two months, could flip the dollar’s fate and lead to some profit-taking in gold.
U.S. economic recovery from Covid-19 has been mixed with employment rebounding by a combined 7.3 million jobs in May and June, after a loss of more than 21 million jobs between March and April. But the economy itself shrank by a record 32.9% in the three months through June, adding to the 5% contraction in the first quarter, as business lockdowns forced by the pandemic took a toll on growth.
Analysts consensus for the non-farm payrolls growth in July is 1.6 million jobs. But President Donald Trump, who needs to tout a big economic recovery to boost his reelection hopes in November, suggested on a Fox News appearance on Wednesday that “big jobs numbers (were) coming on Friday," though private payrolls data keeper ADP reported Wednesday that just 167,000 jobs were added in July.
“Trump is betting his reelection that the economy will bounce back stronger with him than with Biden,” said Moya. “If ADP (NASDAQ:ADP) and ISM have anything to say about Friday’s numbers, investors may expect a softer reading than the consensus estimate of 1.6 million jobs created.”