Gold investors appear to be bowing out of an increasingly erratic market.
Open interest in the precious metal, a tally of outstanding futures contracts, has plunged to the lowest in more than seven months. The drop comes as volatility measures for bullion surge to multi-year highs.
Gold futures swung between gains and losses Thursday, dropping as much as 1.2% as the dollar advanced. Pressure to dump bullion to raise cash and cover losses in other markets has sent the metal tumbling this month, blunting the boost from easier monetary policy worldwide, which is a usually boon to the non-interest-bearing metal.
“Gold is not really managing to hold its own in the current market environment,” Daniel Briesemann, an analyst at Commerzbank AG (DE:CBKG), said in a note.
Gold futures for April delivery rose 0.1% to settle at $1,479.30 an ounce at 1:30 p.m. on the Comex in New York.
Bart Melek, head of commodity strategy at TD Securities, said surging volatility has prompted momentum-tracking commodity trading advisors to exit gold.
On Wednesday, the Senate cleared the second major bill responding to the coronavirus pandemic and White House economic adviser Larry Kudlow said the government might take equity positions as part of an aid package. The European Central Bank launched an extra emergency bond-buying program worth 750 billion euros ($811 billion).
Haven-seeking investors have turned from gold to the U.S. dollar instead, which soared to a record Thursday.
“While stimulus measures/rate cuts — including the ECB emergency bond-buying program — are usually positive for gold, we think any support will be short-lived,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia. “There is a clear preference for the U.S. dollar over gold as global market risks intensify, and that should pressure gold prices lower in the near term.”
In other precious metals, silver rose on the Comex, while platinum fell and palladium rallied on the New York Mercantile Exchange.
(C)2020 Bloomberg L.P.
Gold Buyers Retreat as Prices Convulse in Cash-Haven Tug of War
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