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By Eileen Soreng
(Reuters) - Gold prices dropped nearly 2% to a near two-week low on Tuesday, while palladium slumped 15.5% as investors scrambled for cash to cover losses in other asset classes mainly driven by a crash in oil markets as the coronavirus wrecks economies.
Spot gold was down 0.6% at $1,682.93 per ounce at 10:58 a.m. EDT (1458 GMT), having earlier hit a low since April 9 at $1,659.68. U.S. gold futures dropped 0.5% to $1,702.90.
Palladium was 10.3% lower at $1,941.89, while platinum fell 4.3% to $737.19 and silver was down 4% at $14.76.
"Oil has really got the entire commodity complex down with it ... A lot of people are exiting positions that they were very profitable on with a wait-and-see attitude to see whether there's further spillover from the energy into precious metals," said Bob Haberkorn, senior market strategist at RJO Futures.
Benchmark Brent and U.S. oil futures for June delivery plunged to around two-decade lows, a day after U.S. May futures sank into negative territory for the first time in history as demand tumbled due to the coronavirus outbreak.
The nosedive in U.S. crude prices and dismal corporate earnings reports ignited fears over lasting damage to the global economy from the pandemic, sending global stocks lower.
Bullion has on occasion moved in tandem with equities recently, especially as sharp sell-offs in wider markets force investors to sell precious metals to meet margins calls and cover their losses.
"The historic collapse in oil prices and rising fears over a severe global recession may create another dash for cash, essentially exposing gold prices to downside shocks as the dollar appreciates," said FXTM analyst Lukman Otunuga.
"Although the unfavourable global macroeconomic conditions, chaos surrounding the coronavirus outbreak and gloomy outlook for oil markets could accelerate the flight to safety, gold may not be the first destination of safety for investors."
Gold, considered a safe store of value during political and financial uncertainty, has been facing tough competition from another safe-haven, the dollar, in which it is priced. A stronger dollar makes gold expensive for holders of other currencies.
However, a wave of stimulus measures by central banks to ease economic damage from the new coronavirus pandemic and inflows into exchange traded funds (ETF) are likely to keep gold supported, analysts said.
Holdings in the SPDR Gold Trust, the world's largest gold-backed ETF, are now at their highest in over three years.
(Reporting by Eileen Soreng and Swati Verma in Bengaluru; Editing by Tom Brown)