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Gold Crashes to Three-Month Low Amid Stronger Dollar, Market Selloff

September 21, 2020 at 18:13 by Andrew Moran

Gold futures are trading at their lowest levels in about three months as the yellow metal joined the broader market selloff. Gold prices slumped primarily on a strengthening US dollar as several factors would typically drive metal prices higher. Other metal commodities also plunged to kick off the trading week, leading to investors wondering if this is a buying opportunity or a permanent downward trend?

December gold futures cratered $48.30, or 2.46%, to $1,913.80 per ounce at 18:01 GMT on Monday on the COMEX Division of the New York Mercantile Exchange. Gold prices are now trading their lowest levels since the middle of July, but they are still up nearly 26% year-to-date.

Silver, the sister commodity to gold, is also crashing to start the trading week. December silver futures plummeted $2.49, or 9.21%, to $24.63 an ounce. The white metal wiped out nearly a fifth of its 2020 gains in a single session, shedding its YTD surge to below 38%.

Precious metals are deep in red territory on Monday because of a surging US dollar, which has stabilized in September. The US Dollar Index, which measures the greenback against a basket of currencies, advanced 0.79% to 93.66, from an opening of 92.97. Still, the index is down 2.8% on the year. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

The move in the metals market might be surprising, considering that a lot of the factors triggering a steep selloff in the broader financial market would be bullish for gold.

Analysts are concerned about a resurgence in the rising number of coronavirus infections in the US. Earlier this month, it looked like the COVID-19 pandemic would be on a steady decline, but confirmed cases trended higher last week. This sparked tremendous worry ahead of the cold and flu season.

Investors are also doubtful that US lawmakers can pass a fiscal support bill to help the US economy, something the Federal Reserves has repeatedly pushed Congress to do, even if it is $1.5 trillion. But the doubts contributed to the massive decline in equities.

Politics are also adding to stock market woes on Monday, with the passing of Supreme Court Justice Ruth Bader Ginsburg leading to beliefs that there would be added unrest if Republicans nominate and approve a new Justice.

In other metal markets, October copper futures fell $0.086, or 2.76%, to $3.03 per pound. October platinum futures shed $56.60, or 6.03%, to $881.90 an ounce. October palladium futures dropped $97.30, or 4.09%, to $2,283.50 per ounce.

If you have any questions and comments on commodities today, use the form below to reply.

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