Sunday, October 24, 2021

Gold Rebounds from ‘Flash Crash’, But Still Finishes at March Low

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imageCommodities18 minutes ago (Aug 09, 2021 03:51PM ET)

(C) Reuters.

By Barani Krishnan – Gold rebounded from its “flash crash” in Asian trading but still settled at near five-month low on Monday, casting pessimism in its outlook amid expectations of monetary action by the Federal Reserve that could significantly strengthen rival dollar.

The Dollar Index hit a three-week high against a basket of other currencies after Friday’s stronger-than-expected U.S. jobs report spurred bets that the Fed could move more quickly to taper the monthly stimulus of $120 billion it has been providing for the Covid-restrained economy. A rollback in the stimulus and eventual rate hike could spell doom for gold in the near-term.

“Gold is in trouble now that Wall Street is convinced that the Fed will taper its QE program soon, potentially driving Treasury yields and the dollar sharply higher,” OANDA analyst Ed Moya said, using the abbreviation for quantitative easing.

“Gold’s overnight flash crash was a perfect mix of Asia playing catch-up over with their Fed taper bets, plunging commodities as slowdown concerns grow across Asia, and some thin conditions given the holidays in Japan and Singapore.”

Gold’s front-month gold on New York’s Comex settled down $36.60, or 2.1%, at $1,726.50 an ounce, its lowest since March 31. Prior to the start of the U.S. session, the benchmark gold futures contract plunged to $1,672.80 in the Asian session.

Since January, gold has been on a tough ride that began in August last year — when it came off record highs above $2,000 and meandered for a few months before stumbling into a systemic decay from November, when the first breakthroughs in Covid vaccine efficiencies were announced.

After initially bottoming out at under $1,675, gold appeared to break its dark spell with a bounce back to $1,905 in May. Since then, it has seen renewed short-selling that took it back and forth between $1,700 and $1,800 for a while before the move again toward $1,600.

Gold Rebounds from ‘Flash Crash’, But Still Finishes at March Low

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