After a Monday morning flash crash in gold and silver what comes next
Tony Sycamore August 9, 2021 3:31 AM
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.
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.
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
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.