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
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Trade 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
1In the case of all DFBs, there is a fixed expiry at some point in the future.
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.