Gold futures traded lower on Monday, as investors sell the precious metal to generate cash to cover margin calls on the back of a decline in the U.S. stock market.
Bullion’s decline on Monday came amid news that a large investment fund, Archegos Capital Management, had dumped $30 billion in holdings, including big positions in ViacomCBS
VIAC,
and Discovery
DISCA,
making some investors concerned about contagion. Benchmark U.S. stock indexes traded lower on the news.
“The Archegos margin call default is threatening to cause major losses at some investment banks and has put contagious pressure onto the equity markets over the weekend,” with the result that gold has come off said Rhona O’Connell, head of market analysis, EMEA and Asia regions at StoneX.
“This is perfectly normal,” she said in Monday’s newsletter. “ Almost invariably when the equities markets come under pressure gold will come down also.”
“When other markets are suffering and there is the possibility of margin calls or a loss of liquidity or a simple financial loss, gold is one of the first assets to be sold in order to raise cash and minimise the damage,” she said.
Gold for April delivery
GC00,
GCJ21,
was off $23.30, or 1.4%, to trade at $1,709 an ounce, following a 0.5% weekly slump. Prices based on the most-active contract were poised for their lowest finish since March 8, FactSet data show.
May silver SIK21 SI00 shed 47 cents, or 1.9%, to trade at $24.65 an ounce, after posting 4.6% decline for the week on Friday. May copper
HGK21,
shed 1.3% to $4.01 a pound.
Metals futures face a holiday-shortened week. Commodity and other financial markets will be closed on Good Friday this week.
Meanwhile, the U.S. dollar edged up by 0.2% to 92.92, as measured by the ICE U.S. Dollar Index
DXY,
A stronger dollar can weigh on dollar-priced assets, making them more expensive for overseas buyers. The 10-year Treasury note
TMUBMUSD10Y,
was yielding 1.682%, up from 1.658% at the end of last Friday. Bond prices rise as yields fall.
Palladium led the losses on Comex Monday, with the June contract
PAM21,
down 5.1% at $2,539.50 an ounce.
Nornickel on Monday said it completed phase two repairs at two major mines in Siberia. It expects the Oktyabrsky mine to fully resume production in the first 10 days of May and the Taimyrsky mine to resume output in early June.
“This could be negative for palladium over a very concise term as the last estimate was about 12 weeks for repairs to be complete,” said Stephen Innes, chief global markets strategist at Axi, in a market update.
Rounding out action on Comex, the most-active July platinum contract
PLN21,
traded at $1,174.10 an ounce, down 0.6%.
