· Gold set for biggest weekly drop in nearly 7 years in virus-led sell-off
Gold prices fell further on Friday and were on track to post their biggest weekly drop in nearly seven years, as a rout in global equities forced investors to cover margin calls.
Spot gold was down 0.9% to $1,562.30 an ounce by 0139 GMT, after a more than 3% sell-off in the previous session.
For the week, it was down about 6.7% - the biggest since June 2013.
U.S. gold futures fell 1.7% to $1,563.10.
· A significant sell-off in equities would place further pressure on gold as investors would liquidate positions to meet margin calls, ANZ analyst Daniel Hynes said.
“However, the market is relatively long and there are no signs of investors getting bearish,” he said.
· Asia’s stock markets were hammered as panic gripping world financial markets deepened and even safe-haven assets were ditched to cover losses in the wipeout.
· The International Monetary Fund on Thursday urged countries to work together in responding to the rapidly spreading outbreak, and called for more donations to help the poorest countries deal with the escalating pandemic.
· The European Central Bank approved fresh stimulus measures to help the euro zone economy cope with the growing cost of the epidemic, but kept interest rates unchanged.
· U.S. House of Representatives Speaker Nancy Pelosi told reporters that lawmakers and the White House had neared agreement on a legislative response to the outbreak and said she hoped to make an announcement on Friday.
· The Federal Reserve moved to stem a market meltdown on Thursday with offers of $1.5 trillion in short-term loans that some analysts say could point to more aggressive action from the central bank in coming days to stimulate the economy.
· Airlines appealed for urgent government financial support as U.S. carriers rushed to cut flights to Europe in the wake of new U.S. travel restrictions.
· Palladium rose 1.4% to $1,856.88 per ounce, having fallen about 20% in the previous session, while platinum gained 0.1% to $763.72. Both the metals were, however, headed for their biggest weekly decline on record.
· Silver fell 2.4% to $15.44 per ounce.
· Gold investors will turn their attention to the Federal Reserve’s upcoming meeting after the central bank made an emergency rate cut last week. The Fed offered a huge injection of liquidity to the Treasury market Thursday in moves reminiscent of its quantitative easing program during the financial crisis of 2008. Elsewhere, the European Central Bank unveiled a series of monetary policies Thursday that failed to pacify traders.
“There’s been some existential sort of issues in play which have resulted in gold getting whacked in the shorter term,” Hynes said. “But when I look at all the things that tend to drive gold prices, they still look like they’re going to support significantly higher prices -- bond yields are falling, we expect to see the U.S. dollar remain relatively weak.”
Among other main precious metals, silver fell as much as 3.1% to the lowest since July. Platinum rose 4% after closing at the lowest since 2003 and palladium surged 5.1% after an almost 20% slump, with Thursday’s losses pushing both into bear markets.
· Bullion is set for its biggest weekly loss since 2016, despite climbing to the highest in more than seven years earlier this week, as investors sell the metal to meet liquidity needs. Volatility continued in equities as markets try to gauge whether emergency fiscal and monetary packages will be enough to stave off a recession amid the coronavirus pandemic that’s hitting the world economy.
The sell off in equities this week has triggered margin calls, with investors looking for opportunities where they can cash in. At the same time, a stronger dollar has also curbed gold’s appeal.
Reference: Reuters,Bloomberg
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