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Gold’s record rally is moving tantalizingly close to the psychologically key $2,000 (1,556 pounds) level, powered by investors seeking cover from COVID-19′s global economic toll, as reflected in dollar weakness, faltering stocks and U.S.-China trade tensions.

Spot gold prices have surged 53% in the last 14 months, blowing past 2011′s record high of $1,920.30 an ounce to an all-time peak of $1,943 earlier on Monday.

Analysts said the slide in the rival safe-haven dollar was the tipping point for gold’s latest surge, with the greenback plunging to a two-year low.

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“To some degree, gold replaces the USD,” said Hans Ritter, global head of trading at Heraeus.

Fuelling bullion’s upward path has been economic and political uncertainty stemming from the coronavirus pandemic and the response by central banks -- to slash interest rates and flood markets with cash.

This has fuelled fears of inflation, which would typically devalue other assets, and has also lowered returns on government bonds, making gold more attractive.

Gold’s rise has also been mirrored by a slide in real yields on 10-year U.S. bonds, which are at record lows.

“When we think about the gold market what we’re really thinking about is what happens with real U.S. yields,” said Capital Economics analyst Kieran Clancy, adding inflation expectations were likely to rise as the global economy rebounds, pushing real yields even lower and gold higher.

“That means risk assets and gold go up together, which sounds crazy but makes sense” and that momentum is likely to change only when central banks begin to consider raising nominal interest rates.

Financial investors, mainly in Europe and the United States, have been on an unprecedented buying spree, with gold-backed exchange-traded funds having added a record 734 tonnes worth $39.5 billion to their stockpiles in first half of 2020, according to the World Gold Council.

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This has offset a collapse in retail gold demand in major consumers China and India.

While analysts believed the rally was on solid ground, they were mindful of corrections given its pace.

“The speed of the upswing should sound a warning bell ... as this can often precede a fall,” Commerzbank analyst Carsten Fritsch said in a note.

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