Gold futures were rising modestly on Monday as global markets were in a free fall, partly sparked by a plunge in crude-oil prices and mounting concerns about the spread of the infectious disease COVID-19.
“Risk aversion is very high to start the trading week. Global stock markets are melting down, while currency and commodity markets are in turmoil,” wrote Jim Wyckoff, senior analyst at Kitco.com in a Monday research note.
Gold for April delivery GCJ20, 0.00 on Comex gained $11.70, or 0.7%, at $1,684.10 an ounce, after bullion put in a 6.79% gain last week, representing its largest weekly rise for a most-active contract since 2011, according to FactSet data.
May silver SIK20, -2.82%, meanwhile, was off 43 cents, or 2.5%, at $16.830 an ounce, after booking a 4.89% gain based on the most-active contract.
Global markets were in turmoil which have reached a fresh peak after Russia and the Organization of the Petroleum Exporting Countries failed to strike an agreement on deeper crude production cuts. In response, Saudi Arabia slashed crude prices and was looking to ramp up production, a move that is intended to cement its market share, leading investors to worry about a price war that could send shock waves through markets.
The problems around oil comes as infections of COVID-19 are growing and threatening to put a further dent in global supply chains and economies already reeling from the epidemic that was first identified in December in Wuhan, China and has infected 111,284 cases, and claimed 3,900 lives.
Gold prices had been at an intraday peak at $1704.30 an ounce, but has pulled back since, leading some analysts to speculate that traders are readjusting their portfolios amid a market rout that may result in some margin calls.
“People and traders are selling gold to invest in crude oil and also meet margin calls on crude oil. Crude oil looks much more risk free at current price of $31.80 (nymex) than gold at $1676.00” wrote Chintan Karnani, chief market analyst at Insignia Consultants.