Bengaluru — Gold slid 1% on Friday as traders took profits, but the metal was on track for a third consecutive monthly gain as the spread of coronavirus gathered pace.
Spot gold was down 1% to $1,626.40 an ounce at 11.34am GMT. US gold futures slipped 0.9% to $1,628 an ounce.
“There’s a bit of profit-taking in gold,” Bank of China International analyst Xiao Fu said, adding she was “not surprised to see some correction from time to time especially when you have excessive build-ups. The market is pricing in three cuts [in US interest rates] by the end of this year and that’s increased from one cut [expected] earlier. So, the sentiment has shifted, and with lower US yields, we should see gold prices be very supported.”
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Gold has added more than 2% so far this month. Prices hit a seven-year high of $1,688.66 earlier this week on coronavirus fears. Four more countries reported their first virus cases, with countries other than China now accounting for about three-quarters of new infections. The virus scare sent world share markets plunging again on Friday, compounding their worst week since the 2008 global financial crisis.
“One might imagine that there would be robust demand for gold in this environment, yet precisely the opposite is true this morning,” Commerzbank analysts wrote in a note. “We attribute this to forced selling aimed at offsetting losses elsewhere.”
Among other precious metals, palladium declined 3.6% to $2,743.54 an ounce, but was on track to gain for the seventh consecutive month, and also mark its biggest monthly gain since November 2016.
Palladium jumped to a record $2,875.50 in the previous session on a sustained supply shortfall, with the world’s largest producer of the metal, Nornickel, projecting a global deficit of 0.9-million ounces in 2020.
“When sentiment is ruled by fear, investors always rush to cash and liquidity, and also sell profitable investments due to margin calls or to cover other investment losses,” said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.
Platinum shed 2.2% to $878.35, en route to its worst fall in a week since September 2011. Silver fell 2.8% to $17.21 an ounce, on track for its worst month in three.