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Gold Plunges Again, Taking Silver With It, As Dollar Blazes

Published 09/23/2020, 03:22 PM
Updated 09/23/2020, 03:23 PM

By Barani Krishnan

Investing.com - Gold dived anew Wednesday, pulling silver down with it after a one-day breather, as the dollar continued its trailblazing rally.

Spot gold, which reflects real-time trades in bullion, was down 39.64, or 2.1%, at $1,860.62 by 3:12 PM ET (15:12 GMT). Its low for the day  — $1,856 — set a new two-month trough for the yellow metal.

At Wednesday’s session low, the bullion indicator was just $61 from the July 17 bottom of $1,795.11 — which would be the next target of bears. If it gets there, the move would effectively end gold’s reign above the $1,800 level that has prevailed since late July.

Though gold was being hammered by the relative strength in its nemesis, the dollar, technical charts for the yellow metal show that a break below $1,800 was rather likely, said gold chartist Rajan Dhall.

“Elliott Wave downside targets point to the $1,767 area,” Dhall said in a commentary posted on FX Street. 

On the futures side, U.S. gold for December delivery settled down just $39.20, or 2.1%, at $1,868.40 per ounce, after bottoming at $1,863.80.

Silver took an even worse pounding. The spot price was down $1.688, or 6.9%, at $22.691, after a two-month low at $22.745. The next lows it risks are $22.40, $21.90 and $19.90, charts show.

With Wednesday’s slide, spot gold has lost almost 5% on the week and is down nearly 6% for the month, while showing a drop of over 10% from August record highs of $2,073.

The dollar’s two-month long blitzkrieg, which has run parallel to the plunge in gold, received more firepower Wednesday as the British pound tumbled on concerns of a new U.K. lockdown over the COVID-19. 

The Dollar Index, or DX, which tracks the greenback’s performance versus six currencies, was near session highs at 94.445 at the time of writing, marking its loftiest levels since mid-July.

Given the yawning U.S. fiscal deficit and concerns of economic recovery still being restrained somewhat by the six-month long coronavirus pandemic, many precious metals bulls have been caught off-guard by DX’s uncharacteristic surge.

Some analysts, however, point to exogenous factors such as the underwhelming recovery of the U.K. and European economies compared to that of the United States amid the COVID-19. U.S. housing, employment, auto sales and general consumer sentiment have registered growth, albeit slowly, since July despite the absence of new stimulus spending. All these have given the dollar a bid while weakening gold’s case as a counter haven. 

Global events have also bolstered the dollar, with renewed U.S.-Sino tensions adding to the strength of the greenback, which has positioned itself as the default trade to the Trump administration’s war of words over China.

Federal Reserve Chairman Jerome Powell further endorsed this week the U.S. financial recovery from a near 33%-slump in second-quarter GDP sparked by the COVID-19. 

Powell made no bones of the fact that another stimulus package was critical for the recovery to continue, though he alluded to the probability of it not emerging due to the tussle in Congress between the administration and Democratic lawmakers.

Latest comments

way oversold for now. reversal coming anytime soon
What seemed to happen to gold & gold-mining in Feb-March, 2020--- stocks plummeted, margin calls occurred, g-gm were liquidated for the margin calls, dropping their price temporarily. Then gold/gmg soared 1) as a safe haven. 2). trillions of dollars printed as rescue packages. (likely future inflation). And treasuries no.longer safe haven for various reasons. Same this time? Tech, etc liquidated, margin calls......
god baless you 🏡
very very good
very good
7AM: 6 7PM :
I'll start buying some gold at $1500/oz, silver at $20/oz and platinum at $750/oz. If it never happens, oh well, stocks & Bitcoin have served me well. :)
very nice
It’s the same as happened in march of this year; dollar went up, world indices and gold went down, then gold went to all time highs. In a world lacks understanding with this site being full of traders, you can simply manipulate. As Europe approaching close again, and US with no conclusion about virus effect and limits, there is no real solution for business cycle, but I can promise you dear writer we are approaching to some very lovely and sweet end, for those who understand that this manipulation brings nothing but corruption.
This is a corrupt market, no doubt. The country went ever deeper into debt to keep BA and other zombies afloat. In the long run, you can't gaslight the market.
Thanks Barani, as always a good unbiased picture! 👍
hi
Gold is dead boys. There might be a chance in Q1 Next year, buys that's the last chance. If not, we go to below 1000 over the next years
Once Biden wins and Democratic be take the Senate Gold will be on auto pilot higher for years. They will ******the Economy.
The economy is already *******.
Don't watch Gold.  Wait 'til Silver breaks below $20.  Then it will be time to buy both.  This is just a retrenchment, before pushing on to $2500.
I'll watch neither. I will be watching the DJIA and NASDAQ. When they bottom out, I'll be happy to buy PM's again without fear.
.44% up is blazing lol
Doesn't expain why the dollar is up....manipulation is the real answer here. There is no reason why the USD should be up.
dollar buys things. Gold shines but little else
It's about the confidence in the government's ability to trade with other countries for goods and services. The higher the confidence the stronger the dollar's value and viceversa. Yes maipulation does have an affect but much lesser than the value of confidence.
The dollar is up because people have nowhere else to go. Until recently, European currencies were highly valued, weakening the dollar. Now that the virus is rising in Europe and there is concern of further shutdowns, those investments are no longer seen as safe, leading investors to move pit of those currencies and into the dollar.
The gold is saying: I'll go, but I'll be back!
Regardless of the dollar strength lately gold should be at a much higher price do to the us debt mounting, Biden’s potential presidency (raising taxes on capital gains and taxing the wealthy into oblivion), the possibility of government overstepping and shutting everything down again, housing market that’s teetering on the edge of a cliff, record highs of of delinquency’s in auto loans, rents, and mortgages. The list is never ending.
"Should be", also known as "hope" is not an investment strategy. When the U.S. equities markets goes down, everything goes down with it, PM's. You don't have to look back at 2000 or 2008, just look back to March 2020! The point to buy into PM's is exactly the same as the bottom of the equities market. Before that, you get burned.
what seemed to happen to gold/gold-mining in Feb-March, 2020--when stock market plunged, investors had margin calls, liquidated gold to cover the margin calls. At least that's what I understood at the time. Eventually gold/gm stabilized and then soared 1) a safe haven & 2) with.trillions dollars being printed for rescue package. And with treasuries no longer the safe haven
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