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Gold futures fell sharply Thursday to trade below $1,600 an ounce, as a selloff in the stock market sent traders scrambling to sell positions in the precious metal in a bid for cash.
Traders are selling “what they can amid [in a] panicked marketplace,” said Jim Wyckoff, senior analyst at Kitco.com, in daily note. Market liquidity “in a panicky global marketplace is drying up as traders and investors back away from trading markets. ‘When in doubt, get out is the mantra today.”
Gold for April delivery GCJ20, -3.59% on Comex fell by $62.80, or 3.8%, to trade at $1,579.50 an ounce, looking to extend its decline to a third straight session. A settlement around this level would be the lowest since March 2, according to FactSet data.
May silver SIK20, -5.19% lost 81.1 cents, or 4.9%, to $15.965 an ounce, poised for the lowest most-active contract finish since July of last year.
“The notion that gold has to serve as a financial safe-haven during this crisis is at best myopic, at worst misguided altogether,” said Ryan Giannotto, director of research at GraniteShares, which offers the GraniteShares Gold Trust BAR, -3.25%.
“Over the three weeks since this [stock market] selloff began, gold rallied 1.25%, a behavior consistent with its 1.75% monthly compounded gains over the last 18 months,” he told MarketWatch. “Over this same time period, aggregate bonds have appreciated by only 0.04%, which have come under massive selling pressure this week.”
“In other words, gold has provided 31 times the inoculating effect of aggregate bonds during the coronavirus selloff,” he explained. “So acute has been this rotation out of fixed income that the asset class has forfeited more than a year’s worth of coupons.”
Benchmark U.S. stock indexes dropped Thursday, with the Dow Jones Industrial Average DJIA, -7.99% down over 1,800 points, or 7.9%, at 21,694.51, and the S&P 500 SPX, -6.76% and Nasdaq Composite COMP, -6.12% sliding into bear-market territory.
The 10-year U.S. Treasury note yield TMUBMUSD10Y, -15.86% was down 13 basis points to 0.70%.
The market moves follow an address to the nation late Wednesday by President Donald Trump, who announced restrictions on foreign nationals entering the U.S. from Europe for 30 days in an effort to fight the COVID-19 outbreak.
Other metals traded broadly lower on Comex, with April platinum PLJ20, -9.25% traded at $798.20 an ounce, down 8.1%, and June palladium PAM20, -15.49% dropped 11.4% to $1,976 an ounce.
May copper HGK20, -1.88% down 2% at $2.451 a pound, with prices on track for a 4% loss on the week.
Drew Rathgeber, senior futures broker at Daniels Trading in Chicago, expects copper to decline for another [2-4 weeks, then bottom out, given the “current economic situation with the [coronavirus] pandemic spreading further and further.”
