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Gold Tumbles Again, Folding In Wednesday’s After-Hours Slide

Commodities Aug 20, 2020 03:12PM ET
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By Barani Krishnan

Investing.com - Gold futures settled down another 1.2% on Thursday, accounting for the selling that occurred after the previous day’s official session, as the dollar’s logic-defying strength kept buyers from supporting the yellow metal in a bigger way.

Both futures on Comex and the spot price of bullion traded Thursday above Wednesday’s post-settlement lows. But the strength of the Dollar Index, which reflects the greenback’s performance against a basket of six major currencies, limited the safe-haven’s rebound after Wednesday’s near $43, or 2.1%, drop.

Benchmark December gold futures on Comex settled down $23.80 at $1,946.50 on Thursday. 

The spot price of gold, which reflects trades in bullion, meanwhile, rose $18.97, or almost 1%, to $1,947.93 by 3:00 PM ET (19:00 GMT). Spot gold, which typically trades at a discount to Comex, did not fall as much as gold futures on Wednesday.

Traders said gold needed to post a convincing rebound between overnight Thursday and into Friday’s opening session in Asia to return to the path of recovery.

“Targets on the topside that need to be broken if the buyers are to take back more control,” Greg Michalowski, an analyst posting on ForexLive, said, citing a minimum of $1,970 — Monday’s peak before the rally on Tuesday. 

Sunil Kumar Dixit, an independent precious metals chartist, concurred, saying: “Gold needs to hit and hold above $1,970 to return to a position of strength.”

In Thursday’s session, gold traders remained perplexed for a second day in a row with the dollar’s inordinate strength despite U.S. Treasury yields sliding back into the negative and the greenback putting in a weaker performance against a bunch of currencies, from the euro to pound and yen. The Dollar Index fell on Thursday but remained stubbornly above the 92.70 level, making it difficult for gold to claw back much of Wednesday's losses.

The Dollar Index is the antithesis of the precious metals and safe-havens trade and its plunge to 27-month lows of 92.11 on Tuesday propelled gold’s return to above $2,000 per ounce. The December gold contract hit one-week highs of nearly $2,025 on Tuesday.

But gold plunged the very next day as the Dollar Index jumped after the release of the Federal Reserve’s July meeting minutes that served more as an indictment on the U.S. currency and economy. 

Some forex traders said the greenback probably rebounded as short-sellers on the currency exited on seeing the Fed unwilling to control the yield curve of Treasuries — despite the central bank vowing to keep interest rates at near-zero and virtually print as much as money as necessary to help the U.S. economy recover from the coronavirus pandemic.

 

Gold Tumbles Again, Folding In Wednesday’s After-Hours Slide
 

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Comments (12)
John Miller
John Miller Aug 20, 2020 7:01PM ET
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REAL gold UP
John Miller
John Miller Aug 20, 2020 6:59PM ET
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paper gold
paul guzman
paul guzman Aug 20, 2020 6:22PM ET
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un buen accionista debe tener oro en su cartera... tomen nota y apliquen
Francesco Lucchesi
Francesco Lucchesi Aug 20, 2020 4:51PM ET
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gold tumbles? ****is this article about? it has gone up more than 1%
Barani Krishnan
Barani Krishnan Aug 20, 2020 4:51PM ET
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Spot, not futures.
ATUL BARIDE
SecondWise Aug 20, 2020 4:19PM ET
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The DXY is oversold.. Gold rising in deflation is anmoly
Barani Krishnan
Barani Krishnan Aug 20, 2020 4:19PM ET
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The contrary is true.
Amir Ghorbani
Amir Ghorbani Aug 20, 2020 3:58PM ET
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Evidence of the dollar index can be seen in the upward trend of gold
Barani Krishnan
Barani Krishnan Aug 20, 2020 3:58PM ET
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Not enough though, Amir.
Matt luck
Matt luck Aug 20, 2020 3:48PM ET
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Always funny the kids who think this can be manipulated. It's a zero beta asset, it's not supposed to have crazy moves. And it really hasn't. So many transactions between willing sellers and willing buyers statistically prove price is fair market value every single day. It's impossible to time it. Just keep a diversified portfolio and keep buying.
Barani Krishnan
Barani Krishnan Aug 20, 2020 3:48PM ET
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Unfortunately, Matt, I wish your argument was true but often isn't on days of untoward moves like yesterday. These things usually surface years later, after investigations. One classic example was a verdict the CFTC announced yesterday -- yes, ironically yesterday, on a day the DXY had an unwarranted move higher on no deserving driver. Here are the details announced by the CFTC about the case involving Nova Scotia between 2008 and 2016: "Specifically, the order finds that on thousands of occasions between approximately January 2008 and July 2016, BNS, by and through certain traders based in New York and overseas, placed orders to buy or sell gold and silver futures contracts with the intent to cancel those orders prior to execution. According to the order, the traders engaged in this unlawful conduct with the intent to manipulate prices by sending false signals of supply or demand designed to deceive market participants into executing against other orders the traders wanted executed."
Barani Krishnan
Barani Krishnan Aug 20, 2020 3:48PM ET
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Here's the link to the CFTC announcement: https://www.cftc.gov/PressRoom/PressReleases/8221-20
Wolf Deutschland
Wolf Deutschland Aug 20, 2020 3:46PM ET
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Exactly the oposite. No slide. After hours rise.... finally
Barani Krishnan
Barani Krishnan Aug 20, 2020 3:46PM ET
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DXY came up again, eating into gold's after-hours rise. The comical rise of the DXY, an index not deserving of a 92 handle even, for all the trillions in deficit the US keeps accumulating.
Vin Leo
Vinleo Aug 20, 2020 3:35PM ET
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Gold is looking very good. Consolidating in the 1900’s before the next run up
Chinese Flu
Chinese Flu Aug 20, 2020 3:31PM ET
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banks and fed are manipulating the SH out of this
 
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