After a Monday morning flash crash in gold and silver what comes next

A sea of red for commodities into the end of last week following the better than expected non-farm payrolls data that showed the US economy added 943,000 positions in July, up from an upwardly revised 938,000 in June.

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The unemployment rate dropped more than expected, to 5.4% from 5.9%, indicative of a continuation of growth and a healing labour market, but not at a fast enough pace to stoke fears of a sooner than expected taper.

The better jobs data sent the US dollar and US bond yields higher, never a good formula for commodities. Gold was amongst the worst performers on Friday as it closed over $40 lower at $1762.70 (-2.29%), just above crucial uptrend support coming in $1755/50 area.

After an innocuous first hour of trading for the new week, at 8.50 am Sydney time or 6.50 pm ET, gold slipped through the $1750 support level and within 10 minutes had fallen -$73.00 on the back of what appears to have been stop-loss related selling in very thin market conditions.

“Flash crashes” are not uncommon during the early hours of the Asian time zone. For more information on why a “flash crash” might occur, please refer to an article we wrote on a flash crash in AUDJPY in 2019 that hopefully will provide more insights here.

This morning’s fall in gold triggered a plunge in silver from $24.00 down to a low of $22.10. Offering some encouragement for those quick enough and brave enough to buy the dip in gold, the $1677 low in gold was just ahead of the $1676 double low from March this year.

Gold has since recovered and is trading near $1740, below former support, now resistance at $1750/60. Silver has rebounded and is currently trading at $23.90, just below former support, now resistance at $24.00/20.

Both gold and silver need to reclaim the resistance levels mentioned above on a daily closing basis. Otherwise, the risks are for a retest of this morning’s “flash crash” lows in the coming sessions.

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Source Tradingview. The figures stated areas of 9th of August 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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