Gold wavers after topping US$1,700 amid market mayhem

[SINGAPORE] Gold retreated in volatile trading after turmoil in the oil market, the spread of the coronavirus, sinking equities, and expectations of easier monetary policy pushed prices above US$1,700 an ounce.

The metal hit the highest since 2012, before paring gains, as Brent collapsed, futures on the S&P 500 Index sank, and the entire Treasury yield curve dipped below 1 per cent for the first time. Investors have already driven holdings in bullion-backed exchange-traded funds to a record as the coronavirus hurt the outlook for growth.

The traditional haven has sprinted higher this year, following an 18 per cent surge in 2019, as the global health crisis expanded and central banks cut interest rates to try and stem the damage. Gold has immunity to the virus, according to Goldman Sachs Group Inc, which dubbed the metal as the currency of last resort and predicted that prices could top US$1,800 an ounce.

"There's a clear rush to safe-haven assets at the moment and gold's a major beneficiary," said Michael McCarthy, chief market strategist at CMC Markets in Sydney. Markets are concerned that "we could see a more ugly situation before things get better, which of course is good news for gold", he said.

Spot gold surged as much as 1.8 per cent to US$1,703.39 an ounce, the highest since December 2012, before dropping 1 per cent. Prices were 0.6 per cent lower at US$1,663.47 by 12.54pm in Singapore. The earlier gains came as 10-year US Treasury yields plunged below 0.5 per cent to a record low amid the stampede for safer assets.

The US and Europe now face the "distinct possibility" of technical recessions in the first half as the outbreak hurts demand and supply, and drives investors to safe havens, according to Pacific Investment Management Co's Joachim Fels. Over the weekend, Italy locked down a swathe of the nation.

Even after the Federal Reserve implemented an emergency rate cut last week, there are forecasts for more easing, which would benefit non-interest bearing gold. In addition, investors will track this week's scheduled policy meeting of the European Central Bank.

Among other main precious metals, silver lost 2.9 per cent, platinum fell 2.8 per cent and palladium dropped 3.1 per cent.

BLOOMBERG