Gold price to record high due to poor economic data

The gold price reached a new record of more than €50,000 per kilo this week. In dollar terms, the price rose to $1,750 per troy ounce, the highest level in seven years. Investors are seeking refuge in gold due to the poor outlook for the global economy. Precious metals are also benefiting from new monetary stimulus by the Fed and the ECB. Both central banks will buy hundreds of billions worth of bonds in the near future.

This week, there were again dramatic figures on unemployment claims in the United States, which showed that once again 5.25 million people have lost their jobs. This brings the total number of jobless claims in the US since the start of the corona crisis to more than 20 million. By comparison, that's almost as many as all the jobs created in the last decade.

More than 20 million jobless claims in the U.S. (Source: Bloomberg)

Global economy hit hard by coronavirus

Macroeconomic data in Europe also do not look good. In March, the purchasing managers' index fell to an all-time low in several countries. It was also revealed that in March there was an average of 51% fewer new cars have been sold than usual. These figures are comparable to the credit crisis of 2008.

All the stimulus measures by central banks have calmed down the financial markets, but the economic outlook remains uncertain. Governments are trying to cushion the economic damage suffered by companies, causing public finances worldwide to deteriorate and interest rates to rise again.

Flight to precious metals

Central banks are trying to dampen this effect by buy more government bonds, fuelling fears of currency depreciation. That is why savers and investors are flocking to precious metals such as gold and silver. As a result, not only the spot price increases, but also the premium on physical coins and bars. Also, delivery times are much longer than usual.

Several banks expect the gold price to rise further, as central banks stretch their balance sheets with new asset purchase programs. This also happened after the 2008 financial crisis. The prices of precious metals initially went down a bit, only to rise just as fast again.

Gold price in euros rises to record high

This contribution was made from Geotrendlines