By Barani Krishnan
Investing.com - U.S. stocks may be crumbling, but the safe-haven crowd in gold took Wall Street’s biggest selloff in three months in stride, nudging the yellow metal’s price toward the $1,750 level amid fears of continued economic fallout from Covid-19.
The abrupt reversal in risk saw investors piling into the dollar and U.S. Treasuries instead, as fear of a second wave of coronavirus infections and the deflation that could follow kept many off gold. Gold typically performs well in an inflationary environment.
“That’s not all,” said Eli Tesfaye, precious metals strategist at RJO Futures in Chicago. “We could return to the March days where each plunge in stocks brought down gold as well because people needed to cover margins on their equity losses and gold was one of the best assets you could liquidate for that.”
U.S. gold futures for August delivery settled up $19.10, or 1.1%, at $1,739.80 per ounce. They hit 1,754.85 at the session high, their highest in nine days.
Spot gold, which tracks real-time trades in bullion, slipped $6.12, or 0.4%, to $1,732.22 by 2:39 PM ET (18:39 GMT). It hit 1,744.84 at the session peak.
On Wall Street, the Dow lost more than 1,800 points, plunging 6.8%. The S&P 500 slumped almost 6% while Nasdaq fell over 5%.
Stocks crashed as total U.S. Covid-19 cases topped 2 million, with a jump in cases reported in Florida, Texas, and Arizona after five weeks of declines across the country. The potential for a second wave of infections from the virus prompted fears there could be another at least partial shutdown of the US economy, which was mostly closed in March and April.
Some, however, were more optimistic about gold’s prospects.
“As a second U.S. virus wave concerns become the consensus, a slower economic recovery seems destined to be met with much more stimulus,” said Ed Moya, an analyst at New York’s OANDA.
“The only thing that could derail gold right now is if risk aversion intensifies too much that investors start to scramble for cash,” added Moya. “Gold seems poised for another attempt at $1,750 and then possibly the $1,800 level.”