GOLD USD |
By Markets/commodities, reporter Gold prices are acting a touch strange lately, with the haven metal
plunging within the face of a dive in global stock markets hit by the spread of COVID-19 and its impact on the economy in China and around the world. the valuable metal usually finds support as a drop by the stock exchange tends to lift the haven appeal of gold, with benchmark stock indexes within the U.S., Europe, Asia, Canada, the center East and Latin America suffering losses for the week. this point around, however, given the steep stock-market declines, gold has become the asset of choice among investors to get cash. “Investors are selling anything with a bid and running for canopy, which includes typical hedges like gold,” said Brien Lundin, editor of Gold Newsletter. “We saw similar behavior during the 2008 financial crisis, however, and once investors understood and appreciated the scope of financial institution stimulus coming down the pike, they began buying gold,” he said. “The price quite doubled from the lows thereafter.” On Friday, the most-active April gold derivative instrument GCJ20, +1.31% settled at $1,5866.70 an oz , down $75.80, or 4.6%, for the session. It saw a weekly loss of about 5%, the sharpest decline since the week ended Nov. 11, 2016. Prices fell by 1.3% from the top of January. In the U.S., the Dow Jones Industrial Average DJIA, -1.39%, S&P 500 SPX, -0.82% and Nasdaq Composite Index COMP, +0.01% closed Thursday in correction territory. The Dow and S&P 500 ended sharply lower again on Friday. Read: Stocks get slammed as investors fear a ‘supply shock’ that central bankers can’t fix “This was an unprecedented week and is capitulating into panic selling into many markets including precious metals,” Peter Spina, president, and chief military officer at GoldSeek.Com, told MarketWatch. “The gold market has had heavy fund holdings grow heavily over the last several months’ run-up in gold that now, with the overall markets selling off, a number of that excessive positioning is being shaken out.” Likely adding to pressure on gold prices: “Physical transaction in China and India are typically conducted face to face, and that we anticipate that these transactions are getting to plummet because the coronavirus crisis plays out,” said Peter Grant, vice chairman of precious metals at Zaner Metals, adding that these two countries account for about 1,000 metric plenty of demand annually. Meanwhile, silver prices have taken successfully alongside gold, with prices for the May contract SIK20, +1.36% down $1.278, or 7.2%, at $16.457 an oz on Friday, for a weekly loss of nearly 12%. That was the most important weekly percentage decline for a most-active contract since April 2013, consistent with FactSet data. “Silver is in even worse shape thanks to its industrial attribution and slack in industrial demand and fears of greater demand loss because the virus fears hit commodity and energy markets,” said Spina. The gold-to-silver ratio is “slightly exceeding last year’s highs above 95,” he said, highlighting the acute moves for both metals. On Friday, about 95 ounces of silver would buy one ounce of gold. Taking a glance at the larger picture surrounding gold’s volatile moves, Lundin said: “Gold’s being buffeted by waves of selling, likely from equity traders getting market calls and wanting to raise cash, followed by waves of shopping for from investors who see a flood of financial institution stimulus on the way.” Read: The Fed can’t stop coronavirus from slamming the economy, but it could ease the pain Lundin expects to ascertain “much higher” gold prices within the weeks and months ahead. “The stimulus programs arising will need to include not only rate cuts, but more [quantitative easing] than the last go-around, plus fiscal measures like massive government spending programs,” he said. Precious metals like gold tend to draw in buyers during a low interest-rate climate. “For now, though, everyone’s running for canopy ,” said Lundin.