By Barani Krishnan
Investing.com - For better or worse, gold is wedded to stocks through this pandemic. And on Wednesday, it was for the worse as the yellow metal fell its most in a day since the start of April, as Wall Street fell on ugly economic data, worrisome earnings and weak oil prices.
Gold futures for June delivery on New York’s COMEX settled down $28.70, or 1.6%, at $1,740.20 per ounce. Just on Tuesday, June gold hit a seven-year high of $1,788.75, capping a gain of $165, or 10%, since the end of March in a rally that’s seen few stops.
Spot gold, which tracks live trades in bullion, was down $6.23, or 0.4%, at $1,720.24 by 3:30 PM ET (19:30 GMT).
On Wall Street, the Dow fell almost 2%, underscoring the impact of Covid-19 as retail sales in March plunged to their lowest ever reading from stay-at-home orders and closure of non-essential businesses in most of the United States.
In normal times, this kind of gloomy data would have sent gold to some sort of a high. But the pandemic has resulted in extraordinary circumstances in the relationship between the yellow metal and stocks, as huge selloffs on Wall Street in recent weeks have resulted in liquidation of gold by investors to cover losses in equities and elsewhere.
“Gold’s rally is taking possibly a timeout here, but the bullish outlook appears to be firmly intact,” said Ed Moya, analyst at online trading platform OANDA. “Gold could easily see a pullback towards the $1,700 an ounce level before it makes another attempt at cracking the $1,800 level and then possibly test the record highs made in 2011.”
The stronger dollar also weighed on gold on Wednesday as the greenback fared better in the safe-haven stakes against the yellow metal and competing currencies like the Swiss franc.