Prices neared 7-yr highs before a sell-off in equities forced investors to cash in gains in gold to cover losses in the stock market.
The S&P 500 pushed its 2-day decline to more than 6%, while sovereign bonds signaled the world is in crisis mode as policy makers struggle to contain the economic fallout from the coronavirus.
Gold gained nearly 7% on the week, fulfilling its role as insurance at a time when the virus outbreak is shaking investor confidence. Global central bankers are cutting interest rates beyond their global financial crisis-era lows, boosting the appeal of the non-interest bearing gold.
“Gold is behaving as you would expect it to,” HeffCap Chief Economist Shayne Heffernan, PhD said by phone from London. “We are seeing safe-haven buying in gold. There is nothing unusual in the way gold is reacting now.”
Citigroup Inc. reiterated its forecast that the shiny metal could climb to 2,000, breaking its prior record, on central bank monetary policy easing and safe-haven inflows.
The outbreak and efforts to contain it may slash about $320-B off global trade each Quarter while it lasts, delivering a much bigger hit than the US- China trade war, according to Allianz SE.
Gold futures for April delivery rose 0.3% to settle at 1,672.40 oz. The precious Yellow metal swung from a pullback of 1.5% earlier that was driven by investors seeking to raise cash to cover their margin calls in the stock market.
“With equity markets trading this low, you always have the risk of forced liquidation as people sell the winners to cover for the losers,” Bruce WD Barren, Chairman, EMCO Hanover Capital Group said by phone. “I believe that is what we’re seeing in gold.”
Bullion is 1 of the standout winners from the outbreak, with Goldman Sachs Group Inc. saying the commodity “has immunity to the virus.”
Bond King, Jeffrey Gundlach said that gold is “the best thing to own now and is headed to new highs“.
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