Gold Hits $2,000 For the First Time In History As Dollar Extends Declines

As central banks and governments around the world pledge more than $20 trillion in spending to combat the coronavirus pandemic, gold has rallied to the highest levels on record.

Gold prices hit an all-time of $2,000 per ounce Tuesday, extending a year-to-date gain that has driven a rally in bullion and prompted the largest inflows into gold ETFs in history.

Spot gold prices traded at $2,000 per ounce in early New York dealing, rising 1.7% on the session as the U.S. dollar struggled to hold gains against a basket of its global peers. The gain extends gold's year-to-date advance to just over 31.5% Comex gold futures for August delivery, meanwhile, rose 1.65% to $1,998.40 per ounce.

Data from the World Gold Council, published last week showed that  flows into gold-backed ETFs have risen to 734 tonnes over the first half of the year, an all time high that surpasses the previous record set in 2009. 

The SPDR Gold Trust ETF GLD, the world's largest, was marked 1% higher in Tuesday at $187.37 each, a move that would take its three-month gain to around 28%.

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Gold's rise has largely paralelled an historic decline in the U.S. dollar, which as fallen nearly 10% against a basket of its global peers since mid-March, when the Federal Reserve first said it will buy an unlimited amount of government debt, as well as corporate and municipal bonds, in the biggest expansion of its balance sheet in history, which now stands at more than $7 trillion.

Central banks and governments around the world, in fact, have spent or committed more than $20 trillion in financial support for the global economy since the coronavirus outbreak, putting downward pressure on fiat currencies and increasing the value of hard assets such as gold and silver. 

Benchmark 10-year U.S. Treasury note yields, meanwhile, fell to the second-lowest levels on record Tuesday, slumping 4 basis points to 0.511%, even after the Treasury itself said it would borrow $947 billion over the three months ending in September, thanks in part to the costs linked to various government coroanvirus support pledges. Another $1.216 trillion will be sold between October and December, the Treasury said.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies and has largely been the market's preferred tool to express concerns for government spending largess, was marked 0.12% lower at 93.444, extending its decline from late March to around 9.5%.