Metals Stocks: Gold posts a second straight session loss as coronavirus worries continue to swirl

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Gold prices ended lower on Wednesday, building on the previous session’s retreat, even as worries remain over the spread of coronavirus outside of China.

“It appears the bearish aspect of reduced consumer demand for the precious metals amid the potential for a slowdown in global economic growth is presently trumping the safe-haven demand aspects of the coronavirus scare,” said Jim Wyckoff, senior analyst at “China, which is hit hardest by the outbreak, is a world leader for consumer gold demand.”

“It can also be correctly argued the gold market is seeing a corrective pullback from recent solid gains that pushed prices to a seven-year high earlier this week,” said Wyckoff, in a market update.

Gold for April delivery GCJ20, +0.02%  on Comex fell $6.90, or 0.4%, to settle at $1,643.10 an ounce. The yellow metal jumped to a seven-year high on Monday as worries about COVID-19 sparked a global equity rout, prompting investors to pile into traditional havens.

March silver SIH20, -1.35%  lost 35.7 cents, or 2%, to end at $17.834 an ounce. May SIK20, -1.36%, which is now the most active, lost 1.9% to settle at $17.914. 

U.S. benchmark stock indexes saw mixed trading Wednesday after posting sharp declines on Tuesday, but stocks are significantly lower for the week.

“There is some downside correction in gold despite the risk-off trading mood,” said Ipek Ozkardeskaya, strategist at Swissquote Bank, in a note. “The price of an ounce eased to $1625, after Monday’s advance to $1691. Yet buyers continue piling into gold at price retreats to hedge the risk of a deeper equity selloff.”

Worries about the spread of COVID-19 outside of China continue to drive trade across financial markets, with assets perceived as risky, including equities and commodities, under pressure as investors pile into haven assets. The number of confirmed cases and deaths outside China has continued to rise, particularly in Italy, Iran, Japan and South Korea. Stocks extended losses Tuesday after the Centers for Disease Control and Prevention said Americans should prepare for the spread of the coronavirus in the U.S.

See: COVID-19 case tally: 81,191 cases, 2,768 deaths

Analysts have tied the retreat by gold in part to positioning, noting that data had shown extremely high net long speculative positions in gold futures ahead of the recent push to a seven-year high. Still, the degree of the pullback in light of the continued selloff in equities was widely described as a surprise.

“I guess the big question today is with correlations pointing higher why we did have back to back daily price gaps lower in gold, as surely these moves are beyond just a healthy market correction after all its raining rate cuts,” said Stephen Innes, chief market analyst at AxiCorp.

“Bullion should continue to find more support from accommodative monetary policy worldwide, a rapidly shrinking pool of risk-free assets, and lower beta of traditional risk-off currencies even without triggering worst-case pandemic fears,” he said in a recent market update.

In other metals trade, April platinum PLJ20, -1.84%  fell 1.9% to $914.80 an ounce, while March palladium PAH20, +1.02%  rose 1.7% to 2,692.80 an ounce. June palladium PAM20, +1.55%, which is now the most active, rose 2% to $2,666.80.

March copper HGH20, -0.39%  lost 0.2% to $2.5725 a pound. The most-active May contract HGK20, -0.52%  shed 0.3% to $2.5735.

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