In August, with the correction in prices, there was some brightness in gold. During trading hours in Asian markets on August 9, gold fell 4% within 15 minutes to $1,700 an ounce in what some considered a ‘flash crash’.
The World Gold Council (WGC) in its latest report has explained the possible reasons for this.
Gold traded weakly on August 6 (Friday), down 2.3%, as strong US payrolls data suggested the Fed could be lower than expected. On the same day, the US dollar also strengthened, as did yields, leading to a further decline in the yellow metal prices.
On Monday (August 9) of the following week, there was a sharp sell-off in gold in the Asian markets in the amount of more than $ 4 billion. The report noted that this occurs during a period when there is generally low liquidity across all assets in global markets.
WGC further stated that there were some technical factors that could have caused this quick sell-off. First, technicians highlighted the recent “death cross” where the 50-day SMA fell below the 200-day SMA, which is considered bearish. Second, a quick selloff may have triggered some stop-loss orders that were probably located around the $1,700 level, and this created a snowball effect, leading to additional selling.
The WGC said that what happened that day was significant as gold fell less than 2% during US market hours.
Still, despite a short-hours flash crash, gold edged slightly lower month-on-month in August on strong interest rates and slight weakness in exchange-traded funds (ETFs). The WGC said that in August, gold-backed ETFs saw net outflows of 22.4 tonnes, as North American outflows exceeded inflows into European and Asian funds.
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