Gold sheds one percent, palladium 10pc as oil rout prompts dash for cash

• Spot gold was down 0.8% at $1,678.68 per ounce by 1050 GMT. U.S. gold futures dropped 1.2% to $1,690.40.

Gold prices fell more than 1% to a near two-week low on Tuesday, while palladium tumbled 10% as a rout in oil markets prompted panic selling across assets and forced investors to sell precious metals to cover their losses.

Spot gold was down 0.8% at $1,678.68 per ounce by 1050 GMT. U.S. gold futures dropped 1.2% to $1,690.40.

Palladium was last 9.4% down at $1,962.45 an ounce, while platinum dipped 3% to $747.82 and silver fell 2.4% to $15.01.

"The collapse in oil prices has continued today, creating another dash for cash, and no market is being left unscathed,"  Saxo Bank analyst Ole Hansen said, adding the $1,635 level could be the next target for gold.

Worries about credit defaults are rising and "into that  environment, gold is not able to withstand the pressure coming from the need to de-leverage", he added.

U.S. oil futures traded in negative territory, after sinking below zero for the first time ever on Monday, as concern grew the sector will run out of storage for a glut caused by global coronavirus lockdowns.

The nose-dive in U.S. crude prices and dismal corporate earnings reports prompted concerns about the lasting damage to the global economy from the pandemic, sending global stocks lower.

Gold is considered a safe store of value during political and financial uncertainty, but bullion has on occasion moved in tandem with equities recently, especially as sharp selloffs in wider markets force investors to sell precious metals to meet margins calls and cover their losses.

But the current slide might not be as steep as a free-fall in mid-March, when gold slid as much as 4.6% while palladium plummeted about 28% since "we don't have the same amount of elevated positions in the futures market", Saxo Bank's Hansen said.

However, a wave of stimulus measures by central banks to ease the 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.

Countering this, however, was waning physical demand from top consumers India and China.

"Gold looks a bit vulnerable once these ETF inflows ease somewhat," Commerzbank analyst Carsten Fritsch said.

Adding further pressure on bullion, the dollar, another safe-haven, surged.

"Only in case of longer lasting depression, could we see more upside in gold prices from current levels," Julius Baer analyst Carsten Menke said.