Thursday saw U.S. gold futures posting their biggest losses in a month, showing that even a “safe haven” investment such as gold is not immune from the recent global market downturn.
As investors shy away from risk and the market sinks for days straight, experts are raising questions about the precious metal whether it can possibly sustain its long market rally.
Precious metals meltdown
Silver also crashed almost a full 10% lower as investors sold at rates not seen since early May.
Copper also sank 8% as the belief in useful and precious mineable matter was shattered.
Even oil dropped 5%, as commodity markets saw the most sell-offs and took the largest hit as a result of the global risk aversion that is hurting markets everywhere.
While gold fell much less in comparison, only 2.5%, investors are rattled and disillusioned by the volatility in gold prices and feel they have lost their safety premium – effectively nullifying all of the biggest selling points for gold as an investment.
Investors turn from gold
“Gold is never a safe haven,” said Dennis Gartman, an independent investor and expert on gold.
“When something can move 3, or 5 or 6 percent in the course of two days, that’s not a safe haven. Safe havens should be quiet and stable … not violent.”
The gold futures contract on New York’s COMEX set a session low at $1,721.34 an ounce in the sharpest one-day decline since August 24. On Thursday, the bullion spot price stayed low at $1,738 an ounce, down 2.4% from Wednesday’s $1,781,29.
Investors who are seeking safety from what was once their “safe haven” of gold are rushing to the U.S. dollar, whose record looks comfortingly steady against the speculative flows of gold.
As U.S. Treasuries rallied, the dollar hit eight-month highs against both the euro and the pound.
Indeed the sell-off on gold may be attributed to the dollar, as investors freed leveraged positions in dollars as a response to the Federal Reserve’s announcement of more quantitative easing.