The gold price hit a nine-year high and could re-test its record highs later this year even as growing risk appetite pushed share markets higher in overnight trade.
The positive trading session on Wall Street sets up the S&P/ASX 200 Index (Index:^AXJO) for early gains with the futures market tipping a 0.8% rally.
It's not normal for gold to run higher when risk assets are in vogue, but we aren't living in normal times.
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Gold heading to new highs
The price of the precious metal gained over a dollar to trade at US$1,810 an ounce, the best it's been since 2011.
This means commodity has returned a little over 30% over the past year, and that's a little ahead of the outperforming tech-laden Nasdaq Composite (INDEXNASDAQ: .IXIC).
If it can consolidate around the US$1,800 mark, there's a good chance it can push towards its all-time peak of US$1,920 an ounce that it reached in September of that year.
COVID-19 cure won't kill the gold bull
I think there's a good chance we could see the precious metal try to re-take the record over the coming months.
Even if the COVID-19 pandemic was to die down, I don't think that's enough to kill gold's bull run!
Don't get me wrong, the devastating impact of COVID-19 on the world's economy is a big supportive factor for the safe haven asset.
The fact that no one knows how the coronavirus playbook ends will continue to put the yellow metal on a pedestal.
Bigger drivers for ASX gold stocks
However, the pandemic is not the biggest driver for the gold price, which was already on an uptrend since late 2018 – long before anyone's even heard of COVID.
What's really driving gold is low interest rates and big cash injections by central banks into the financial system.
These stimuli will remain long after a vaccine for the virus is found because the path to economic recovery always takes longer than the fall into recession.
Why gold can keep outperforming post crisis
What will take even longer to fix are government deficits and debt. I am not referring only to Australia but to the US, and that will weigh on the US dollar, particularly once the coronavirus emergency is over.
I believe this explains why the gold price only peaked more than two years after the GFC as the greenback remained weak for a number of years after the financial crisis.
The outlook for the Newcrest Mining Limited (ASX: NCM) share price, Evolution Mining Ltd (ASX: EVN) share price and St Barbara Ltd (ASX: SBM) share price shines bright.
But don't just buy one or two gold miners. You should buy a basket of them as production issues and company-specific risks can cause you to lose money even if you got the macro call right.
