Gold Sinks in Shock Selloff as Traders Cover Stock-Rout Losses
Gold declined in a sudden selloff across financial markets, with some traders dumping metals to cover losses in equities. Silver and copper also plunged.
US technology stocks fell amid renewed concerns over whether massive investments in artificial intelligence will materialize in a big way. Some investors had to exit positions in commodities including metals to provide liquidity, while some sought safety in Treasuries.
Bullion fell as much as 4.1% while silver plunged 11%. Copper on the London Metal Exchange declined 2.7%. The metals have since pared some losses.
“It all happened so quickly and feels like a ‘risk-out’ move,” said Nicky Shiels of MKS PAMP SA. In times of extreme market stress, haven assets like gold will also be sold by investors in dire need of liquidity, she added.
Some of the selloff in gold and silver on Thursday also stemmed from profit-taking as the metals’ most recent blistering rally was driven partly by speculative buying.
“For gold and silver, a great deal of trading remains sentiment and momentum driven. On days like these they will struggle,” said Ole Hansen, a commodity strategist at Saxo Bank.
Traders are now watching US economic data, including core consumer price figures due Friday, for clues on the Federal Reserve’s path for interest rates. Lower borrowing costs tend to benefit precious metals, which don’t pay interest.
Despite the recent rout, many banks expect gold to resume its upward trend, arguing that the drivers behind earlier gains remain intact — including geopolitical tensions, questions over the Fed’s independence, and a broader shift away from traditional assets such as currencies and sovereign bonds. JPMorgan Private Bank sees bullion at $6,000-$6,300 an ounce by year-end, while Deutsche Bank AG and Goldman Sachs Group Inc. also maintain bullish outlooks.
Spot gold fell 2.3% to $ 4,967.84 an ounce as of 12:39 p.m. in New York. Silver dropped 8.4% to $ 77.23. Platinum and palladium fell. The Bloomberg Dollar Spot Index, a gauge of the US currency, was up 0.1%.
Source: Bloomberg.com
