Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Gold's Sudden Glow In A Falling Market

Published 09/21/2021, 04:16 AM
Updated 03/21/2024, 07:45 AM

The Dow Jones experienced its worst drop in 10 months on Monday, falling 600 points or 1.8%. The S&P 500 index lost about the same amount, 1.7%. The dollar index climbed to monthly highs, trading above 93.0.

Intraday, the S&P 500 had fallen more than 5% from early September peaks at one point, interrupting a 10-month streak of gains when the index did not experience such pullbacks.
S&P500 losses exceeded 5% from the peak at one point on Monday
Nonetheless, it can hardly be said that markets have plunged into fear. Currency, debt, and precious metals markets showed sudden resilience or even indifference during yesterday's sell-off in equity markets.
EURUSD barely moved from support at 1.1700
The debt and currency markets are considered the 'smartest' and deepest, so their detachment from yesterday's sell-off should be considered an important signal. It would not be surprising if, later in the day, we see increased buying in stocks of strong companies after the recent downturn.

Buying in gold and gold mining stocks was even more remarkable. The long slump in the sector was interrupted yesterday with a jump of around 3% in the biggest gold stocks. Gold prices added 0.5%, gaining support shortly after falling below $1750.
Barrick Gold shares rallied against falling market
As the previous months have shown, the ironclad support in gold prices is near the $1700 level. But it appears that active buyers have moved into the $1750 area.

Gold's ability to resist the general downtrend speaks to investor confidence that global central bank policies will remain soft enough to avoid triggering a global downward asset sell-off spiral.

Of course, one should bear in mind the risks of volatility ahead of Wednesday's Fed meeting. The outcome of the meeting and comments have, in theory, the potential to break or reinforce any trend (both long term bullish and short term bearish). In practice, however, the FOMC comes with very streamlined wording that does not cause a strong adverse reaction.
Gold showed no sign of fear on falling markets yesterday
Still, the cautious gold bulls should keep in focus the area of $1800, which, if broken, would signal the breaking of the bearish correction. In case the sell-off in the stock markets intensifies further, the focus should be around $1700-1750. A break below that would signal submission of recent buyers and promises to trigger a deeper correction with near-term targets at $1500.

The FxPro Analyst Team

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.