Gold prices fell more than 2% in volatile trading on Monday, as investors liquidated positions in tandem with a broader stock sell-off, although analysts say bullion's appeal as a safe haven asset remains high amid growing fears of a U.S. recession, Reuters reports, UNN writes.
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Spot gold fell 2% to.2,393. 66 an ounce by 11:39 GMT. US gold futures lost 1.4% to.2,434. 10.
"There is some truth in the old fable that all correlations come down to one in the event of a crash, and since traders need to liquidate winning positions to cover margin requirements for other assets, gold's volatility signals the level of panic that has hit stock markets," said Adrian Ash, research director at Bullionvault.
Stock markets plummeted and Japanese stocks at some point outperformed their spending on Black Monday in 1987, as fears of a recession in the US prompted investors to get rid of risky assets.
Data on Friday showed that the U.S. unemployment rate jumped to 4.3% in July, raising the likelihood of the Federal Reserve cutting interest rates in September, and now markets expect the central bank to cut rates by 50 basis points.
"Increased geopolitical tensions and recent hopes for a further rate cut by the Federal Reserve should create favorable conditions for bullion. Ultimately, gold should be able to set a new all - time high once its nerves calm down," said Huntan, chief market analyst at Exinity Group.
Bullion, often used as a hedge against geopolitical and economic risks, thrives when interest rates are low.
Prices for other precious metals also fell as fears of a recession weakened demand prospects.
Spot silver fell 5.7% to.26.92, while platinum fell 4.1% to. 918.35, and palladium lost 4.5% to. 849.05 after hitting its lowest level since August 2018.