Spot gold continued to slide in Asian trading on Tuesday, falling more than $20 in the short term and recently falling below $1,490 an ounce.
Gold has fallen sharply in the short term from around $1,508 an ounce to as low as $1,485.40.
Despite the fed’s further emergency measures, sentiment deteriorated, with gold falling more than $120 from its session high at one point on Monday, falling below $1,500 an ounce and hitting a low of $1451.10 an ounce, or 5.1 percent.
However, gold recovered nearly $70 from its low in early trading, pared losses and closed down $15.25, or 1.0%, at $1,514.06 an ounce.
Gold rebounded after hitting its target of $1,453.10 an ounce and tested resistance at $1,509, Economies.com wrote.
It is important to note that gold’s staying below $1,509 an ounce is the first condition for the bearish trend to continue in the short to medium term, according to Economies.com. Gold needs to fall below $1,453.10 an ounce to confirm it is heading towards $1,400.00 an ounce, with a further bearish target at $1,307.10.
Gold, traditionally known as a “safe haven”, usually does well during market sell-offs, but it was not immune to last week’s plunge in global equity markets as the coronavirus pandemic spread.
Analysts attributed the historic drop in the past week to investors’ “rush to cash in” as they abandoned all asset classes to hold money to cut losses.
Stephen Gallo, head of European currency strategy at BMO Capital Markets, said in a report on Monday that demand has shifted to physical cash over the past week, which has been good for the dollar and has hurt precious metals prices.
He added: “this momentum seems to have continued at the beginning of the week and there is little sign that this liquidity is abating.”
Adrian Ash, head of research at online trading platform BullionVault, told CNBC on Monday that there was a “cash rush” in the market and that he expected prices to fall further in the short term. Typically, consumer demand for jewelry still isn’t there, he said, and many funds and investors are unwinding their positions to profit from the surge in gold prices in recent months.
“In the past, when prices fluctuated, consumer demand came in and set a floor for prices,” he said. But I think what we’re seeing now is more like what we saw during the Lehman Brothers crisis, where the price of gold went through a lot of volatility, and a lot of new investors who were shocked turned to gold as a safe haven, and they saw the volatility.”
“Selling to cash out is still the norm in the gold market,” said Ryan McKay, commodities strategist at TD securities.