By Elena Mazneva and David Stringer
Gold resumed losses in volatile trading across markets as investors gauged the impact of fiscal and monetary stimulus to counter the effect of the health crisis.
Bullion erased earlier gains following declines in U.S. and European stocks on Wednesday, as investors sold gold in a rush for cash to cover losses elsewhere. A stronger dollar and lower inflation expectations are also eroding gold’s appeal.
“It may still be too early to call a bottom with the highly volatile markets we have on hand,” said Jingyi Pan, a market strategist at IG Asia Pte. in Singapore. “Even as we expect gold prices to trade higher given its safe-haven appeal, in the very short term prices may continue to be whipsawed alongside the market.”
Spot gold was 1.6% lower at $1,503.75 an ounce at 10:39 a.m. in London, after a brief advance fueled by news on stimulus measures from the U.S. The country said it’s discussing a plan of as much as $1.2 trillion in spending, while the Federal Reserve reintroduced additional crisis-era tools to stabilize financial markets.
In Germany, Angela Merkel said the government will not rule out joint European Union debt issuance to help contain the impact of the coronavirus.
Gold has slumped about 5% this month as investors rush to raise cash to cover losses in other volatile markets. A collapse in inflation expectations, amid fears over slumping economic activity and the prospects of a global recession, has also reduced demand for the metal.
Other precious metals also declined, with silver’s 14-day relative strength index dropping to about 14 -- deep into oversold territory. In a normal situation, that would be a sign to some traders of a possible rebound soon.
However, the metal may remain under pressure, said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
“Its record discount to gold will only start to come down when the fiscal spending impact begins to stabilize the demand outlook.”
Spot silver lost 1.5% to $12.4250 an ounce, while platinum fell 1% and palladium was down 3.2%.
China, a major consumer of palladium used in pollution-control devices, was reported to explore relaxing some emissions standards to provide relief for carmakers amid falling demand. Car sales in Europe are off to their worst start to a year since 2013 and are poised to deteriorate further.