By Barani Krishnan
Investing.com – Gold prices gained their most in two weeks, with the ominous “flash crash” that greeted the yellow metal at the start of the week slipping into distant memory amid steady progress made by longs over the past 48 hours to recapturing mid-$1,700 levels.
Gold’s front-month gold on New York’s Comex settled up $21.60, or 1.2%, at $1,753.30 an ounce.
It was a comeback of sorts for the benchmark gold futures contract that just two days earlier settled at its lowest since March 31, at $1,726.50. Also prior to Monday’s U.S. session, Comex gold’s front-month had plunged to $1,672.80 in Asian trading in what has since become known as a flash-crash.
Wednesday’s rebound in gold came as the dollar dipped for the first time in five days against rival major currencies. The U.S. 10-year Treasury note also retreated after a one-week rally. Both of these typically move opposite to gold.
“Lower yields and a softer dollar are providing some reprieve or gold which has found its way back towards $1,750,” said Craig Erlam, analyst at New York broker OANDA.
“It was only a couple of days ago that the yellow metal smashed through here in style, with illiquid conditions early in the Asia session adding some rocket fuel to the breakout,” added Erlam. “While it did retest $1,750 later that day from below, that may have been more a case of gold just correcting itself after the flash crash. A rebound off the same level today could be further confirmation of that breakout.”
Gold has been in trouble since Friday’s stronger-than-expected U.S. jobs report for July, which spurred bets that the Fed could move more quickly to taper the monthly stimulus of $120 billion it has been providing to the Covid-restrained economy. A rollback in the stimulus and eventual rate hike could send the dollar and yields spiraling in the near-term, spelling doom for gold.
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 up Most in 2 Weeks as ‘Flash Crash’ Slips into Distant Memory
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