While the equities markets are taking a nosedive on Thursday, the commodities asset class, including gold and silver exchange traded funds (ETFs), have been dragged down along with the markets, mirroring the broad market sell-off of 2008.
iShares Gold Trust (NYSEArca: IAU) was down 2.76% at last check, and the ETFS Physical Silver Shares (NYSEArca: SIVR) was down 8.20%.
Gold contracts for December delivery dropped below $1,750 an ounce, a four-week low, while silver contracts for December delivery fell more than 8%, slipping close to $37 an ounce, reports Matt Day for The Wall Street Journal.
“You got to a point today when [losses across markets]accelerated, that people will be liquidating whatever they can,” Frank Lesh, a broker with FuturePath Trading, said.
On Wednesday, gold prices began falling after news of the Fed’s $400 billion plan to increase its holding of long-term Treasuries. However, the Fed’s warning of “significant downside risks” to the economy should have helped increase gold’s appeal as a hedge, analysts said.
Gold prices have been sliding for this month as traders sold their positions to cover losses during the slump in global equities. Currently, the strengthening U.S. dollar has put a crimp in gold prices since it makes the dollar-denominated gold bars more expensive for foreign investors. [Investors Find Refuge In U.S. Dollar, Treasury ETFs]
With U.S. dollars in high demand, “commodities, including precious metals, will find it difficult to rally,” Standard Bank analyst Marc Ground wrote in a note. “Eventually, as these concerns over a possible U.S. recession become more entrenched, we should see a return to the safe haven of gold and silver.”
iShares Gold Trust
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Max Chen contributed to this article.