Not even gold is immune to the barrage of selling that’s hitting global markets today.
The precious metal jumped above $1,700 an ounce when markets opened in Asia, but couldn’t sustain the new high as investors dumped risk assets in a round of panic selling.
While gold is viewed as classic haven and popular during times of turmoil, it’s been a bumpy move up in the past month. Analysts speculate that the volatility is being caused by investors who need to mitigate losses elsewhere, and therefore are booking recent profits in bullion.
“Gold is seesawing as some investors were apparently forced to sell it to cover losses elsewhere,” said Daniel Briesemann, an analyst at Commerzbank AG.
Gold jumped as much as 1.8% in the Asia morning, but gave up most of the rally later in the day. Spot bullion was up 0.3% at $1,678.69 an ounce as of 11:25 a.m. in London. Prices have jumped 11% this year to a seven-year high.
Other precious metals fared worse than gold.
- Silver fell 2% to $16.97 an ounce.
- Platinum lost 3.4% and palladium sank 5.5%
The consensus is that gold will keep climbing. Prices could rally toward $1,800 within weeks, according to UBS Group AG’s wealth-management unit.
With back-to-back hits from the virus-driven slowdown and tanking crude, all eyes are on what the European Central Bank and Federal Reserve will do to defend inflation expectations, said Wayne Gordon, executive director for commodities and foreign exchange at the bank.
Gold May Hit $1,800 in Weeks, Top Manager Says as Oil Tanks
The clearest sign that investors are still bullish: gold-backed exchange-traded funds are continuing to absorb cash. Bullion funds increased last week by the most since September, according to data compiled by Bloomberg.
Markets are concerned that “we could see a more ugly situation before things get better, which of course is good news for gold,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
To contact the reporters on this story: Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net;Elena Mazneva in London at emazneva@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Liezel Hill
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