It is a strange time for gold to be losing its shine. One of the time-tested and most-trusted haven assets during critical times, gold usually soars amid nasty stock sell-offs such as the one that's causing paranoia in world markets of late.
Precious metal futures were down by almost 6 percent late Friday, suffering the steepest daily drop since June 2013. Investors scampered to sell the yellow commodity to generate cash to cushion losses in their stocks, which continued to slide on escalating jitters about the spread of the coronavirus and its impact on the global economy.
Gold gapped down at the opening bell of the Comex on Wall Street and kept falling and hit a low of $1,564.00 per ounce in mid-day session, down $78 per ounce or 4.7 percent compared to the previous day's close. Before the trading ended, gold had recovered some of its losses, rising back above the $1,580 level.
Gold's latest retreat marks its worst in nearly seven years and caught many investors off-guard and rushing for explanations as to what had just happened. The most typical reaction from them: Gold capitalists do not want to sell but are forced to cover losses in other assets. Other precious metals which include silver and platinum also fell, with palladium dropping as much as 14 percent, the most since 2008.
According to Peter Gant, vice president of gold investment at Zaner Metals, investors view gold as a safe-haven asset, but it is now being battered by deleveraging pressure. This is when investors sell profitable positions to generate cash during a market rout, analysts say.
More than 70 million ounces of gold for April delivery had changed hands by mid-afternoon. On Monday, the precious metal reached a seven-year high within a stone throw away from a $1,700 per ounce level and remains up over $40, year to date.
The collapse stretched to gold mining shares, with the sector's biggest companies falling sharply: Newmont shed over 5 percent in the afternoon session with over 15 million shares exchanging hands. Number 2 in terms of output, Barrick fared moderately better, weakening 4.5 percent, also in volumes of almost three times the normal. AngloGold Ashanti was among the biggest decliners, falling more than 10 percent while units of Australia's Newcrest trading plunged 10 percent.
Concerns over the economic shockwave brought by the coronavirus have jolted markets, sending the S&P 500 index to its worst week since 2008. The epidemic has further undercut demand for raw materials, which was already waning because of rising supplies and worries over global trade conflicts. Return of investments from commodities have likewise dropped on fears the fast-spreading virus will distort demand for fuel and food across the world.
