(Bloomberg) — Gold rebounded Wednesday, extending a series of wild swings that saw the metal hit a record on Friday before plunging to below $1,900 an ounce.
After surging more than 30% since the start of the year, gold’s rally came to a sudden halt as U.S. bond yields rose. Bullion had been one of the best-performing commodities in 2020, as the coronavirus outbreak pummeled the global economy, prompting central banks and governments to deploy massive stimulus. Its haven appeal was underpinned by a slide in U.S. Treasury real yields into negative territory.
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Yet the sharp correction doesn’t signal the end of gold’s run, according to banks including Saxo Bank A/S, which said the sell-off has gone too far. DoubleLine Capital LP’s Jeffrey Gundlach said that he expects gold to keep trading higher despite the setback.
After dropping 5.7% on Tuesday, the biggest one-day loss in seven years, spot gold sank as much as 2.6% to $1,863.15 an ounce. The metal then rebounding sharply, rising as much as 2%, before trading at $1,933.54 at 11:16 a.m. in London. Silver also swung.
Benchmark Treasury yields have climbed more than 10 basis points so far this month, amid improving risk appetite and an imminent flood of debt issuance. The recent rebound reflects investor hopes that the coronavirus will be contained, according to Standard Chartered Plc.
Once gold “got to $2,000 per ounce, in a lot of investors’ minds that could have been an opportunity to take profit,” said Gavin Wendt, senior resource analyst at MineLife Pty.
Gold’s still got plenty of high-profile supporters. Among banks that have forecast substantial gains in recent weeks, Bank of America Corp. predicted that prices will hit $3,000.
“Expectations of a V-shaped recovery from the coronavirus lockdowns remain far-fetched,” Avtar Sandu, senior manager for commodities at broker Phillip Futures in Singapore, said in a note. “The long-term fundamental drivers of gold remain positive in outlook. However, in the short run, gold prices seem to be reacting to headline news events and the technical picture has projected some consolidation ahead.”
(An earlier version of this story corrected the dates of the price moves.)
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