There’s a simple reason that gold is falling along with coronavirus-afflicted global stocks
There’s a simple reason that gold is falling along with coronavirus-afflicted global stocks By MYRA P. SAEFONG for Market Watch
Gold futures trade over 3% lower for the week
Gold prices have been acting a bit strange lately, with the haven metal plunging in 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 precious metal usually finds support as a drop in the stock market tends to lift the haven appeal of gold, with benchmark stock indexes in the U.S., Europe, Asia, Canada, the Middle East and Latin America suffering losses for the week.
This time around, however, given the steep stock-market declines, gold has become the asset of choice among investors to generate cash.
“Investors are selling anything with a bid and running for cover, and that 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 central bank stimulus coming down the pike, they began buying gold,” he said. “The price more than doubled from the lows thereafter.”
On Friday, the most-active April gold futures contract GCJ20, -3.98% traded at $1,585.80 an ounce, down $56.70, or 3.5%, during the session. It was looking at a weekly loss of 3.8%, and lost a grip on a gain for the month.
“This was an extraordinary week and is capitulating into panic selling into many markets including precious metals,” Peter Spina, president and chief executive 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 general markets selling off, some of that excessive positioning is being shaken out.”