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Gold, Silver, Palladium Saw The Most Dramatic Weekly Decline In Decades

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Reversing the bull run seen in 2019, prices of gold, palladium and silver fell drastically this week as recession fears from coronavirus pandemic spooked investors into selling for cash across markets.

 

In the international market, gold recorded its biggest weekly decline since 1983 with a 9 percent fall. Spot gold fell as much as 3.8 percent on Friday alone to $1,517.38 an ounce and US gold futures by 4.6 percent to $1,516.60 per ounce.

 

On MCX, gold futures plummeted Rs 2,000 between intraday high of Rs 42,070 per 10 grams and low of Rs 40,055 on Friday. It closed at Rs 40,348/10 grams, having surged to over Rs 44,700 earlier in the same week.

Gold, Silver, Palladium Saw The Most Dramatic Weekly Decline In Decades

"In the near-term, gold could see further downside because of the need to meet margin calls across other markets and if investors are preferring to move to cash and reduce risk exposure across the board," said Standard Chartered Bank analyst Suki Cooper to Reuters.

The coronavirus spread has also lowered activity in Asian markets, especially in China and India, the two largest consumers of gold in the world.

There is a push for liquidity across markets and not just equity, as more and more manufacturing units and stores shut across the world to limit the spread of infection. There are obvious fears of recession amid the uncertainty over when the epidemic will be contained. Gold prices are unlikely to gain despite its safe-haven appeal.

Other precious metal mirrored losses

Silver slipped below the $15 an ounce level, to a nine-month low of $14.51 an ounce in the international market after a nearly 9 percent fall. The metal saw its biggest weekly decline since 2011.

On MCX, silver futures on Friday declined over Rs 3,000 within the trading day between a high of Rs 43,542 and a low of Rs 40,400 per kg. It closed at 40,487/kg.

Palladium fell 7.8 percent to $1,689.33 per ounce on Friday and recorded its biggest ever weekly decline of 38 percent.

Platinum slumped 3.7 percent to $734.74 and was down more than 18 percent for the week.

Analysts say that there are growing fears among investors about the economic impact of coronavirus. US President Donald Trump declared a national emergency after over 2,000 reported cases of infections reported in the country and at least 48 deaths. In India, over 80 cases have been reported and 2 deaths from the deadly virus.

The global total is heading closer to 150,000 cases and over 5,400 have been reported dead.

Precious metals other than gold have been especially driven lower because these are industrial metals. In the current state of world crisis, which has called for self or government-imposed quarantine measures, consumption is bound to fall for non-essential goods like cars or gadgets.

Palladium, along with platinum is used in car exhaust systems, while silver is used in manufacturing LED chips, RFID chips, touch screens, water purifiers, etc. Demand for these products or jewellery is unlikely in emergency situations.

"If you are sick or self-quarantined, you are not thinking about buying a new car or solar panels," said Phillip Streible, chief market strategist at Blue Line Futures to Kitco News. "I think silver will continue to follow palladium lower as recession fears are expected to pick up."

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