Gold prices slump as investors grow skittish after crude oil collapses
Gold prices slumped on Tuesday as commodity traders are left shaken by the collapse of crude.
Oversupply, weakening demand, rising storage costs and a technicality in the futures market have seen oil prices fall into negativity territory, prompting a sharp decline in gold prices as investors are left shaken by the collapse of crude.
The extraordinary price action in oil markets this week has prompted commodity traders, including those investing in precious metals, to take a step back, with gold prices coming close to hitting a two-week low on Tuesday, falling $20 to touch $1661 an ounce.
Oil prices collapse amid Covid-19 crisis
The US West Texas Intermediate (WTI) slid into negative territory, prompting Brent crude to fall as much as 20% to slip below $20 a barrel on Tuesday – its lowest level since 2002.
The collapse of US crude was driven by weakening demand for oil as a result of the Covid-19 pandemic and global storage facilities reaching their limit.
In an interview with Bloomberg, Gerard Paulides CFO at Vopak, the world’s largest oil storage company, explained how all of its space for crude and refined products has run out due to the Covid-19 crisis.
‘The available capacity on the oil side is almost completely sold out for our terminals,’ Paulides said.
‘For Vopak, worldwide available capacity that is not in maintenance is almost all gone and from what I hear elsewhere in the world we’re not the only ones,’ he added.
Bond prices up as equities and commodity prices fall
Global equities struggled on Tuesday amid the slump commodity prices, with the FTSE 100, DAX, S&P 500 and Hang Seng all sliding by approximately 3%.
In reaction, major government bond prices climbed higher, driving the annual yield offered by the five-year US Treasury bond down to 0.31%.
How to trade commodities with IG
Create an IG trading account or log in to your existing accoun
Enter ‘Spot Gold’ in the search bar and select it
Choose your position size
Click on ‘buy’ or ‘sell’ in the deal ticket
Confirm the trade
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1
- Wide range of popular and niche metals, energies and softs
- Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
- View continuous charting, backdated for up to five years
Live prices on most popular markets