Gold futures on the COMEX division of the New York Mercantile Exchange dropped by nearly 5 percent on Friday, suffering the sharpest daily slide since June 2013, reports Xinhua.
The most active gold contract for April delivery lost 75.80 U.S. dollars, or 4.61 percent, to settle at 1,566.70 dollars per ounce.
Gold was a safe-haven that many investors piled into over the past month as tremors over the coronavirus slowly built. Earlier this week, the yellow metal hit a seven-year high just short of 1,700 dollars per ounce, raising hopes that it might have a shot later in the year at cracking the 1,900 dollar record high.
As for U.S. stocks, the S&P 500 headed for its worst weekly slump since the financial crisis of 2008. The Dow was down 1.39 percent to 25,409.36, and the S&P 500 fell 0.82 percent to 2,954.22 as the stocks market closed on Friday. If equities post sharp losses, gold usually gains, as investors flock to safe-haven assets. However, when hedge funds and other institutional investors had to generate cash to cover their losses in the stock market, safe-haven gold also took a big hit on Friday.
Meanwhile, gold's price is also driven by consumer demand. The COVID-19 outbreak will curb purchases of gold, said some analysts.
Investors absolutely see gold as a safe-haven, but the yellow metal is now succumbing to deleveraging pressure, Peter Grant, vice president of precious metals at Zaner Metals, said in a note.
"This is when investors sell profitable positions to raise cash during a market rout. Frequently the cash is used to cover margin calls in other markets," he added.
The rout of the bullion hammered other precious metals as well. The most active silver contract for May delivery was down 1.278 dollars, or 7.21 percent, to close at 16.457 dollars per ounce. Platinum for April delivery fell 40.80 dollars, or 4.51 percent, to settle at 864.70 dollars per ounce. Still, there were bullish hopes that after Friday's shakeout, gold futures would attempt a return to 1,600 dollars per ounce. Gold should start showing signs of life regardless of what stocks do over the next couple weeks, said Ed Moya at New York-based online trading platform OANDA.
"If panic selling with stocks continues next week, gold will likely reassert its safe-haven status or if markets show signs of stabilizing, we could see the broad based commodity plunge ease," Moya wrote in a daily update to clients.