Metals sell off after Trump win while oil recoups some losses
Metals bore the brunt of global commodity price losses after a US election win by Donald Trump on Wednesday.
The price of gold has been rising steadily thanks to safe-haven buying in response to geopolitical crisis and continued support from loose US monetary policy to reach a more than three-week high on Monday.
On Tuesday the Ukrainian crisis threatens to spin out of control with both sides sending troops into the restive east.
And new numbers in the US show a higher than expected rise in inflation, another positive for gold and its status as a hedge against inflation.
But the gold price does not react as expected. Not at all.
Shortly after the New York market opened, the price of gold suffers a quick gap down dropping $43 an ounce to $1,284.
As the chart shows, during the drop around 8:25 volumes spike with some 2.28 million ounces (64 tonnes) dumped onto the market in three big chunks.
Market watchers scramble to find reasons for the drop:
The flash crash on 15 April 2013 – one year ago to the day – when gold dropped $130 in a single session and more than $200 over just two days, also happened without warning.
The crash took the price of the yellow metal from a high of $1,566 on the Friday to a low of $1,330 on Monday, a 15% smack down.
A convincing argument has been put forward that the drop was the result of the “shock and awe” tactics of a short seller to break the backs of the gold bulls.
April 2013’s plunge sent shockwaves through the gold market and caused a a turnaround in sentiment from which the metal has never recovered.
By lunchtime today gold had creeped back above $1,300, still down $25 or 2% on the day.
Perhaps this time gold will be able to absorb the shocks. Or, more likely, prepare for more assaults.
Source: CME
Image by Javier Cabrio.
Comments
Alberta Doc
It’s strange that no one mentions fraud in their analysis of what has caused these down gaps. Selling a non existing commodity (they don’t actually own the physical metal) through paper contacts, with no requirement to backup those contracts with the actual gold, is a perfect receipe to commit fraud. The big problem is the system. It allows this fraud to happen, but what’s really disappointing is the fact that those in authority choose to turn a blind eye to obvious price manipulation. Why would they do that? Because these fraudsters are in all likelihood the same people who are in control of the system, aka the Government.