Gold bulls work to stabilize price after overnight "flash crash"
(Kitco News) - Gold and silver prices are lower in early U.S. dealings Monday, with gold overnight careening to a more-than-four-month low of $1,676.40, basis October futures, and silver slumping to a more-than-eight-month low of $22.295, basis September futures. However, prices are trading well off their daily lows as the market appears to have stabilized—at least for the moment. August gold futures were last down $15.50 at $1,745.00 and September Comex silver was last down $0.346 at $23.98 an ounce.
The metals are still feeling the reverberations of last Friday's surprisingly strong U.S. jobs report that pushed the U.S. stock indexes to or near their record highs, rallied the U.S. dollar index, pushed the U.S. Treasury yields up (prices down)—all bearish elements for the metals. Gold and silver did quickly recover from their "flash crash" overnight lows and are trading near session highs, but still down on the day. The jobs data Friday immediately set off heightened speculation the Federal Reserve would act sooner to reel in its easy monetary policies. That really spooked the metals markets bulls. Apparently, the metals traders on this day are choosing not to focus on the bullish inflationary implications of rebound in the U.S. economy that is already seeing consumer and producer prices on the rise.
The overnight flash crash in gold and silver prices may also be due to thin trading conditions overnight amid the summertime doldrums. Many traders are on vacation and much of Europe is on holiday during August. Many times the "big boys" like the investment banks will make very big trades in low-volume futures trading conditions, in order to get the maximum bang for their buck, and that may be what happened overnight.
Global stock markets were mixed overnight. The U.S. stock indexes are pointed mixed to weaker openings when the New York day session begins.
In focus to start the trading week is the surging new Covid strain that is forcing major economies once again to assess measures to contain the spread of the virus. China and other parts of Asia are being hit especially hard. The Delta strain surge, if not contained soon, may put a damper on any Federal Reserve notions of acting sooner to taper its bond-buying program (quantitative easing).
Somewhat assuaging the Covid concerns in the marketplace early this week is the huge U.S. infrastructure spending plan that appears ready to pass the Congress and become law.
The key outside markets today see the U.S. dollar index near steady and hitting a two-week high overnight. Nymex crude oil futures prices are sharply down on the increased Covid worries and trading around $65.65 a barrel. Raw commodity market bulls are watching crude oil closely, knowing that if sector leader crude continues to slide, other commodity markets are likely to be pulled down, too.
U.S. economic data due for release Monday is light and includes the employment trends index.
Technically, gold futures bears have gained the overall near-term technical advantage amid the recent steep downdraft in prices. Bulls' next upside price objective is to produce a close above solid resistance at $1,800.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at today's spike low of $1,676.40. First resistance is seen at $1,750.00 and then at the overnight high of $1,763.00. First support is seen at $1,725.00 and then at $1,700.00. Wyckoff's Market Rating: 3.5
The silver bears have the firm overall near-term technical advantage. Prices are in a 2.5-month-old downtrend on the daily bar chart. Silver bulls' next upside price objective is closing September futures prices above solid technical resistance at $25.00 an ounce. The next downside price objective for the bears is closing prices below solid support at the overnight low of $22.295. First resistance is seen at the overnight high of $24.38 and then at $24.75. Next support is seen at $23.50 and then at $23.00. Wyckoff's Market Rating: 2.5.