Government bonds are now the only safe haven bolt hole of note for investors in the current COVID-19 virus crisis.
And after the plunge in activity last month in the huge Chinese manufacturing sector, (which was released over the weekend), investors will be looking for safety big time today (Monday – see separate story).
Gold and to a lesser extent, silver, the traditional alternatives to sovereign bonds, have lost their lustre in the past week to 10 days.
Friday’s performance on the US Comex market is case in point.
Comex gold futures dropped by nearly 5% on Friday, suffering the sharpest daily slide since June 2013.
And while the price rebounded a little in late trading, the week’s loss were pretty severe.
Both gold and silver had rallied in the lead-up to last week’s stock market sell-off. Gold hit a seven-year high last Monday, dragging silver higher as investors flocked to those perceived havens for safety in the face of the worsening level of reports about the impact of the virus outside of China.
But by Friday that rally in precious metals had collapsed as investors rushed to sell the precious metals to generate cash to cover stockmarket losses.
“Investors absolutely see gold as a safe-haven, but the yellow metal is now succumbing to deleveraging pressure,” said Peter Grant, vice president of precious metals at Zaner Metals told Marketwatch.com.
“This is when investors sell profitable positions to raise cash during a market rout. Frequently the cash is used to cover margin calls in other markets” he added.
Comex gold for April delivery dropped $US75.80, or 4.6%, to settle at $US1,566.70 an ounce, for the biggest one-day percentage loss since June 20, 2013.
The most-active contract also registered a weekly slide of about 5%, the sharpest decline since the week ending November 11, 2016. The moves erased what had been a gain for the month and left it down 1.3% from the end of January.
After-hours trading saw the price rise to $US1,587.30 an ounce and the loss to a still substantial $US55.30, or a drop of 3.3%.
Comex May silver dropped $1.278, or 7.2%, to finish at $US16.457 an ounce, for a weekly loss of about 11.6%. That was the biggest weekly slide since April 19, 2013. For the month, the contract was shed 9%.
Other metals followed gold and silver’s lead to end sharply lower. ComexMay copper lost 1.2% to $US2.54 a pound, but still managed a monthly rise of 0.7%. That won’t last after the rotten February survey of manufacturing activity from China on the weekend and the biggest fall on record.
April platinum lost 4.5% to $864.70 an ounce, for a monthly loss of around 10%.
The recent star of commodities, palladium also lost ground on Friday with the April contract on Comex dropping 8.1% to $US2,491.10 an ounce. That was after another record settlement Thursday. The gain for the month was trimmed to a still-solid 12% plus.
Iron ore fell $US1.76 a tonne on Friday to $US83.96 for 62% Fe fines delivered to northern China, to be down 9% for the week.
The drop for the month was smaller – down $US1.02 or just over 1%.
That was after a drop of almost 8% in January. Prices are now nearly 10% under the end of 2019 level of $US93.13
