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Gold Heads for Biggest Quarterly Gain Since 2016 on Virus Woes

Gold bars are seen at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria, March 18, 2016. REUTERS/Leonhard Foeger/File Photo

(Bloomberg) — Gold headed for the biggest quarterly advance since 2016 amid a surge in demand for haven assets due to the ongoing coronavirus outbreak, which shows no signs of abating.

Bullion rose as the World Health Organization warned that the worst of the pandemic is still to come because of a lack of global solidarity. Deaths have surpassed 500,000 worldwide and confirmed cases exceeded 10 million.

There’s also increased geopolitical tension after China’s top legislative body approved a landmark national security law for Hong Kong, a sweeping attempt to quell dissent that risks U.S. retaliation and the city’s appeal as a financial hub. Meanwhile, the Trump administration earlier said it was suspending regulations allowing special treatment to Hong Kong over things including export license exceptions.

The precious metal has rallied 17% this year as the health crisis prompted a wave of stimulus from governments and central banks as they tried to minimize the damage to the global economy. Investors also continue to pile into gold-backed exchange-traded funds, with holdings at a record.

“Low interest rates, monetary policies and the coronavirus are all at play,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “The $1,800 level is a psychological hurdle. At current prices we see gold pushing the boundaries of what our model implies as fair value, so we may need a larger collapse in Treasury rates to push gold past the $1,800 level.”

Spot gold dropped 0.1% to $1,770.88 an ounce at 11:20 a.m. in Singapore. Prices are up 12% in the three months ending June 30, and are set to cap seven straight quarters of gains, the longest such stretch since 2011. Gold futures on the Comex traded at $1,783.20 an ounce, closing in on the $1,800 level.

Investors will also be closely watching comments from Federal Reserve Chair Jerome Powell due later Tuesday. In remarks prepared for testimony before the House Financial Services Committee, Powell stressed the importance of keeping the coronavirus contagion contained as the U.S. economy bounces back from its deepest contraction in decades.

Among other main precious metals, spot silver rose 0.1%, platinum gained 0.4% and palladium climbed 0.7%.

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