Gold prices fall as investors look to stock up on cash


The markets are continuing to struggle as investors and analysts alike worry that coronavirus pandemic appears poised to get worse. Major indexes, such as the Dow, have recently seen their worst single-day performances in decades, while certain industries, such as those in the transportation and tourism businesses, are plummeting.

Although many would expect precious metals to rise during this time, it appears that a large number of investors are selling their stockpiles to have cash on hand in case their living situations get worse.

Gold, a historic safe haven for the wealthy, ended up declining significantly on Thursday. Prices for gold futures dropped by 3.2% to just $1,589.30 per ounce on the New York Mercantile Exchange, extending this week’s decline to just over 5%. Although gold is still up when looking at a 12-month time period, it’s interesting to see that gold prices are moving in the same direction as the general market, instead of moving in the opposite direction as it usually does.

It seems that many investors are selling assets to help raise cash as stocks and other equities continue to fall, often forced to do so to make up for their losses from the stock market. Often times this is because of margin, investors borrowing on credit, with losses triggering margin calls from their brokers.

The well established market rules are out the window right now. It’s really like the Wild West, people don’t really understand what’s going on” said one trader from Bank of Montreal. However, the long-term situation on gold seems relatively strong. With many analysts and economists predicting a recession is now inevitable thanks to the coronavirus, gold could see a major upturn this year. “I think that people have got this wrong, everybody is looking at this event as deflationary, but it is actually the opposite. You’re going to have a reduction of production, so less supply of goods, and the world is going to be flooded with money,” added Peter Schiff in an interview on Thursday.

Other precious metals have followed suit alongside gold, recording impressive gains over the past few months, but the last few weeks have been quite hard on prices. Platinum prices have fallen around 10% over the past couple of weeks. Palladium, now the world’s most valuable precious metal thanks to industrial demand from the auto sector, is trading around $2,220 per ounce. This is around 20% lower than where it was trading back in late February.

The total number of confirmed coronavirus cases around the world is just under 130,000, with the total death count climbing to 4,720. Chinese cases have slowed down, hovering below 81,000, while Italy and Iran have both seen their numbers blow past 10,000. Many countries, including the U.S., have banned travel to both China and Europe, while also discouraging (or even banning) gatherings of over 250 people.

Investment banks like Goldman Sachs have already gone on to say that this pandemic is 2020’s black swan event and will likely be the catalyst for a recession. Investors should prepare accordingly and be ready for the worst case scenario.