Gold and silver prices got hammered on Monday, Aug. 9, 2021, an hour after the Asian session opened.
Gold lost around $87 within 12 minutes in this short, liquidity-starved period, and silver lost nearly $2, i.e., 7.76% of its value in under 12 minutes. There was no news over the weekend or macro-driven event to cause the fall.
Mysterious Whale Dumps Gold
Some suggested that this unknown company had a margin call and had to dump contracts quickly. This entity dumped 54 tons of gold equivalent to $3 billion on a Sunday evening when New York, London, and Singapore markets were closed. Not only that, the entity dumped 4 tonnes of gold during 1 minute at 12:45 am GMT on a Sunday worth $228 million. Two thousand six hundred twelve contracts were traded in over 1 minute at 1.48 am. The entity that did this did not have their clients’ best interests in mind, and any individual responsible would have lost their job.
What we witnessed was an orchestrated attack in illiquid market conditions, potentially multiple pronged on stop-losses that triggered the middle-of-the-night algorithms to kick in. This isn’t the first time this has happened, and it won’t be the last.
So what reason would anyone have to do this? JP Morgan has been selling short paper silver and buying physical at the other end for years. It is probable that paper smashes are still occurring in all metals at the behest of the big players looking to unwind short positions, deleverage and exchange their fake paper contracts for dollars to buy physical.
There is evidence all over the place that this is happening. With gold being classified as a tier 1 asset and the London deadline fast approaching by year-end, what we may be seeing is the unwinding of paper contracts and deleveraging.
A Bullish Case For Gold and Silver
With the fourth quarter commencing tomorrow, the run-up to Christmas is traditionally a strong period for gold and silver. What we have seen of late in the headline-driven world was bullish for gold. Unemployment levels are higher than expected, which means the Fed is less likely to raise interest rates as soon as some are saying.
Yet, gold prices were hammered, and the US dollar surged. Significant money printing, Biden’s green plan are adding to the colossal national debt. These are all bullish factors for gold and silver, yet we don’t see that reflected in the price.
So what we are seeing is a slow drop down to levels in both the metals that we wouldn’t have thought possible at the start of this year. Silver has broken major support at $22, and gold is dangerously close to its $1680 level that has held firm so far.
Be mindful that if you are a buyer of physical metals, these short-term price swings should not worry you at all. It should offer another chance to reload as long-term reasons to own metals are the same as they were 100 years ago.
Looking Ahead
If you trade the metals via miners or any other way, be mindful that when the markets open on the evening of Sunday, Oct. 3, China is on a week-long holiday. We know only too well that during this period, it could be the next planned assault for the paper slammers to dump significant amounts of contracts under cover of darkness in thin liquidity, all in the name of deleveraging.
The Commitment of Traders (CoT) in the next few weeks should make for a much brighter outlook for gold and silver longs, but hang on to your hats in the short term as the manipulators don’t appear to be finished yet.