March 18, 2020 / 3:14 PM / 18 days ago

PRECIOUS-Gold slides over 3% as virus fears drive investors toward cash

 (Updates prices)
    * Silver drops to its lowest level since Jan. 2009
    * Dollar jumps to near three-year high
    * Virus infections over 200,000 worldwide
    * GRAPHIC-2020 asset returns: tmsnrt.rs/2jvdmXl

    By Brijesh Patel
    March 18 (Reuters) - Gold dropped as much as 3.6% on
Wednesday as investors dumped precious metals in favour of cash
after additional stimulus measures by the United States failed
to calm markets hit by mounting fears over the economic downside
from the coronavirus.
    Spot gold        was down 2.7% at $1,486.82 per ounce by
2:28 p.m. EDT (1828 GMT). U.S. gold futures         settled 3.1%
lower at $1,477.90.
    "Gold continues to suffer from risk-off panics in the
market, trading back below $1,500 level as S&P futures gave up
stimulus-driven gains," said Tai Wong, head of base and precious
metals derivatives trading at BMO.
    "Liquidity here, as in most markets, is deeply compromised
and we expect to see continuing volatility, mood-driven swings."
    Wall Street's main indexes slumped and oil prices continued
to slide as investors' appetite for riskier assets remained weak
on growing signs of coronavirus damage to the global economy.
                 
    Further weighing on gold, the dollar index        jumped to
a near three-year high.       
    The virus, which has so far infected over 205,000 people and
killed more than 8,200 worldwide, has wreaked havoc in markets
as countries around the world go into lockdown to contain the
spread.             
    The U.S. Federal Reserve on Tuesday said it would reinstate
a funding facility used during the 2008 financial crisis to get
credit directly to businesses and households on fears of a
liquidity crunch due to the virus.
    On Wednesday, the Trump administration asked Congress to
approve $500 billion in cash payments to taxpayers in two rounds
that would start April 6.            
    "Gold will remain volatile over the next few sessions as
investors await to see if the Trump administration is unable to
quickly pass its massive stimulus plan," said Edward Moya, a
senior market analyst at broker OANDA, in a note.
    "If we see a repeat of the financial crisis when Congress
was ineffective in acting swiftly, the scramble for cash will
continue."
    Gold prices have plummeted more than 12% or over $200 since
surging past $1,700 per ounce last week as investors unloaded
bullion in exchange for cash and to meet margin calls.
    Among other precious metals, palladium        slipped 2.1%
to $1,608.50 per ounce, while platinum        shed 8.8% to
$602.83.
    "We're facing a major demand shock as car sales and consumer
confidence take a major hit. The key to the short-term outlook
is whether the long liquidation phase has run its course," said
Saxo Bank analyst Ole Hansen.
    Silver        dipped 5.9% to $11.85 after falling to its
lowest level since January 2009.

 (Reporting by Brijesh Patel in Bengaluru; Editing by Diane
Craft and Matthew Lewis)
  
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