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Standard Chartered: gold prices supported by investment demand

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Gold prices remain near the recent seven-year highs, with strong demand from exchange-traded products offsetting weakness in the physical markets of key Asian consuming nations, said Standard Bank. “We believe further upside risk lingers,” said Suki Cooper, precious-metals analyst with Standard Chartered. As of 7:40 a.m. EDT, spot gold was $3.90 higher to $1,736.50 an ounce. Data are showing a sharp decline in economic activity as the world combats the COVID-19 pandemic. “While unprecedented monetary and fiscal stimulus and low interest rates have supported a surge in investor interest, expectations of further stimulus and negative real yields are likely to spur the flight to quality,” Cooper said. “Gold ETPs are scaling record highs in tonnage and USD terms, but tactical positioning [in the futures market] is relatively light, leaving room for growth. For now, strong investment demand has more than offset the extreme weakness in physical demand.” There has been a sharp drop in buying from from the gold-consuming nations of China and India, Cooper pointed out. She later added, “We continue to view real yields as the key driver for gold, and low and negative yields continue to set a favorable backdrop.”

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