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Gold: Selloff similar to the financial crisis – TDS

Gold positioning continues to be liquidated aggressively as rebalancing and margin calls prompt funds to sell the yellow metal, seeing prices post their largest weekly decline since 1983, economists at TD Securities apprise.

Key quotes

“The current gold market selloff is similar to what happened during the financial crisis, when prices dropped for a period of over three months along with collapsing equity valuations, as increased volatility and margin calls forced levered investors to sell to provide liquidity.” 

“While the uncertainty surrounding the virus is likely to keep volatility and liquidation risks high, the pending historic low real/nominal interest rates, liquidity injections, quantitative easing and income support programs should reduce volatility and drive capital into gold once again when the dust settles.”

 

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