By Barani Krishnan
Investing.com - Gold, the safe haven, again acted like Wall Street’s band-aid on Monday as investors bleeding from another hammering of equities sold the yellow metal to $1,400 levels to cover margins and losses.
In just a week now, the stampede in gold has cost those most faithful to the metal more than $200 an ounce, as both bullion and futures traded on New York’s COMEX fell through several support levels from seven-year highs above $1,700.
On Wall Street, the Dow, S&P 500 and Nasdaq were all down more than 9% each, ignoring the Federal Reserve’s emergency move to cut rates to near zero and the central bank’s promises to buy $700 billion of assets to support markets.
“Gold positioning continues to be liquidated aggressively as rebalancing and margin calls prompt funds to sell the yellow metal, seeing prices post their largest weekly decline since 1983,” TD Securities said, referring to last week’s 9% loss.
“The current gold market selloff is similar to what happened during the financial crisis, when prices dropped for a period of over three months along with collapsing equity valuations, as increased volatility and margin calls forced levered investors to sell to provide liquidity.”
Gold futures for April delivery on New York’s COMEX settled down $30.20, or 2%, at $1,486.50 per ounce. It earlier fell to a December low of $1,451, a contrast to last week’s seven-year high of $1,704.30.
Spot gold, which tracks live trades in bullion, was down $37.62, or 2.5%, at $1,491.80 by 2:00 PM ET (18:00 GMT).
Yet some still saw light at the end of the gold tunnel for those still long the precious metal.
Adrian Ash, head of research at online trading platform BullionVault, told CNBC Monday that markets were seeing a dash for cash, “you’ve got strong and rising, really quite rampant, physical bullion demand coming in the other direction”.
TD Securities alluded to the same in its outlook for gold beyond the immediate term.
“While the uncertainty surrounding the virus is likely to keep volatility and liquidation risks high, the pending historic low real/nominal interest rates, liquidity injections, quantitative easing and income support programs should reduce volatility and drive capital into gold once again when the dust settles,” it said.