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%.

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