Gold futures saw a sharp drop on Monday, touching lows under $1,900 an ounce, as an apparent flight to dollars, partly fueled by rising global risks that included renewed COVID-19 lockdown measures in Europe, pulled prices for the metal toward their lowest finish in two months.
A selloff across global equity markets, tied in part to worries over the rise in COVID-19 cases and the potential for the renewal of restrictions on activity, as well as uncertainty over a fresh round of government relief, added to the negative tone, analysts said.
“Surging coronavirus cases and doubts over the next round of [U.S.] fiscal support is triggering a wide range risk averse tone that is sending the dollar higher and sinking gold,” wrote Edward Moya, senior market analyst at Oanda, in a Monday note.
Against that backdrop, the dollar was up 0.7% at 93.589, as measured by the ICE U.S. Dollar, a gauge of the buck against a half-dozen currencies. A stronger dollar can make gold more expensive to overseas buyers using other monetary units.
The decline in bullion on the session also was threatening to push the yellow metal beneath its short-term, 50-day moving average at $1,941.78 an ounce — a move that would be seen as contributing to a view that gold’s bullish short-term trend line was in jeopardy. Market technicians view moving averages as dividing lines between bullish and bearish momentum in an asset.
December gold was down $67.80, or 3.5%, at $1,894.30 an ounce, putting the commodity on the verge of its lowest settlement since July 23, according to FactSet data. Prices were also on track to suffer their largest one-day dollar and percentage loss since March.
December silver was sliding $2.064, or 7.6%, at $25.065 an ounce, after last week logging a 1% weekly gain. Prices based on the most active contracts were poised for their lowest settlement since early August.
Financial markets also declined amid “the anticipated political turmoil surrounding [Supreme Court Justice] Ruth Bader Ginsburg’s passing over the weekend,” said Brien Lundin, editor of Gold Newsletter. European equities tumbled Monday, while U.S. benchmark stock indexes moved sharply lower on Wall Street.
“Geopolitical flashpoints like these are no reason to buy gold when they elevate its price, and similarly are no reason to sell gold when they force it lower,” Lundin told MarketWatch. “That’s because they usually pass quickly with no long-term effects on the market.”
“However, when they drive gold lower they can be a buying opportunity,” he said. “Granting that the controversy over naming a successor to Ginsburg will likely add uncertainty to the political situation for weeks to come, there should be little doubt that the Fed will come in with whatever monetary adrenaline is necessary to support the markets.”
“This stands to be a buying opportunity for gold given the very powerful long-term trends of extraordinary monetary accommodation,” Lundin said.
Other metals saw prices drop, with December copper down 2.4% at $3.04 a pound. October platinum fell 7.5% to $869.10 an ounce and December lost 5.4% to $2,253 an ounce.