Gold Races to Test $1,800 Barrier as Coronavirus Infections Rise and Central Banks Pledge Trillions to Blunt Economic Hit

The U.S. dollar has fallen nearly 6% against its global peers since the Fed signaled unlimited bond buying in mid-March, igniting a rally in gold that could bring record high prices in the months ahead.

Gold prices jumped to an 8-year high Wednesday, pushing bullion closer to $1,800 an ounce, as investors seek safe-haven assets amid a surge in U.S. coronavirus cases and the trillions pledged by governments and central banks around the world.

Spot Gold prices were marked 0.6% higher Wednesday at $1,777.53 per ounce, near the highest since 2012 and a move that extends the bullion's year-to=date gain to around 16%. Gold ETFs are also seeing significant inflows, taking total holdings to a record 102 million ounces last week. Comex gold futures prices for August delivery, meanwhile, hit a 2012 peak of $1,794.60 per ounce in overnight trading. 

Hedge funds are also returning to the market, according to the latest Commitment of Traders Report from the Commodity Futures Trading Commission, and are now net buyers of gold for the first time in four weeks. 

"The massive quantitative easing programs by the Fed and other central banks could also increase demand for gold down the road, even though inflation is not a concern currently due to the pandemic’s demand destruction," said Gorilla Trades strategist Ken Berman. 

The SPDR Gold Trust ETF, the world's largest, was marked 0.42% higher in pre market trading at $167.18 each, a move that would take its three-month gain to around 14.3%.

Dr. Anthony Fauci, who heads President Donald Trump's coronavirus task force, told lawmakers Tuesday that the rising infection and hospitalization trend was "disturbing" , but insisted that neither he nor his colleagues were asked to slow the pace of testing by White House officials.

New infections in the United States have passed 2.3 million, in fact, following a one-week increase of more than 25%, fueled in part by an increase in testing but also alongside re-opening efforts in states such as Florida, Texas and California.

Gold prices have also been boosted by concerns for both a second-wave of coronavirus infections, which could slow broader economic growth and lead to a further slide in government bond yields, and the potential debasement of fiat currencies from the trillions spent and pledged by governments around the world to combat the effect of the pandemic.

Central banks around the world had been buying nearly $2.4 billion in financial assets every hour for the two months ending in May, according to Bank of America data, taking the overall total to around $4 trillion. 

Last week the Bank of England committed to increasing its quantitative easing program to around $930 billion and U.S. Treasury Secretary Steven Mnuchin hinted last night that the Trump administration will push for a new economic stimulus plan from Congress later this summer.

The U.S. dollar index, which benchmark's the greenback against a basket of its global peers, has fallen 5.8% 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.