Spot gold hit a record high of $1,945.16 per ounce, and rose 2% to $1,938.27 by 12:29 p.m EDT (1629 GMT). US gold futures gained 1.8% to $1,931.40.
Silver also rallied, jumping as much as 8% to $24.57, its highest since August 2013, and was up 6.8% at $24.29 per ounce.
“The dollar is losing its safe-haven appeal and you’re going to continue to see gold surge as the dollar sinks,” said Edward Moya, senior market analyst at broker OANDA.
“Everything is clicking for gold. There are high prospects the Federal Reserve is going to ramp up their efforts to repair the economy and the virus uncertainty is going to mean that the stimulus trade is going to remain.”
The dollar index hit a two-year low on the US-China tensions and concerns about the US economy as COVID-19 infections show no signs of slowing in the world’s largest economy.
Gold has risen 28% so far this year, marking a shift from before the pandemic, when the bullion had to compete with other safe havens such as the dollar, especially amid Sino-US tensions, which had limited inflows into gold.
China on Monday took over the premises of the US consulate in the southwestern city of Chengdu in retaliation for Beijing’s ouster last week from its consulate in Houston, Texas.
US Senate Republicans are expected to unveil a $1 trillion coronavirus aid package. Investors will also eye the US Fed’s meeting starting Tuesday, where it could flag another accommodative policy shift.
Non-yielding gold is considered a hedge against inflation and currency debasement, with analysts also pointing to massive inflows into gold-backed exchange traded funds as a driver behind its rally.
“A cure for COVID-19 has the potential to revive global risk sentiment and turbocharge investor confidence,” FXTM analyst Lukman Otunuga said.
“The tidal wave of optimism from such a positive development could send market players sprinting towards riskier assets at the expense of safe-havens.”
Platinum rose 2.7% to $938.44 per ounce and palladium jumped 4% to $2,309.06.
Spot gold hit a record high of $1,944.73 per ounce, and by 1132 GMT was up 2.1% to $1,941.67. US gold futures gained 2.1% to $1,937.90 per ounce.
Silver also rallied jumping as much as 8% to $24.57, its highest since August 2013.
Bullion is surging on a broadly weaker dollar, US-China tensions and negative real yields, FXTM analyst Lukman Otunuga said.
“Buying sentiment towards the precious metal is through the roof, with further gains expected in the medium to longer term,” he added.
In the latest escalation of Sino-US tensions, China took over the premises of the US consulate in the southwestern city of Chengdu on Monday in retaliation for Beijing’s ouster last week from its consulate in Houston, Texas.
This sent the dollar index to its lowest in two years.
“Safe-haven demand (for gold) has been rising while there is none for USD anymore,” said ANZ commodity strategist Soni Kumari.
Investors are now awaiting the US Federal Reserve’s meeting starting Tuesday, where it could flag another accommodative policy shift.
“You’d need a pretty upbeat and unexpectedly positive assessment from the Federal Open Market Committee to really dampen this rally,” said Julius Baer analyst Carsten Menke.
“Even if you had a surprise from the FOMC which weighed on gold, this is an opportunity to buy the dip.”
Non-yielding gold is considered a hedge against inflation and currency debasement, with analysts also pointing to massive inflows into gold-backed exchange traded funds as a driver behind its 28% rally in 2020.
Meanwhile, COVID-19 cases surged to over 16.13 million globally, driving expectations of more stimulus to stem the economic blow.
Platinum rose 3.1% to $942.78 per ounce and palladium climbed 3.6% to $2,299.24.