Nearly 365 days after hitting its $2,075 high, gold gets a double punch by strong US figures on Friday and an Asia-style flash crash in early Monday trade, states Ashraf Laidi of AshrafLaidi.com.
Thin liquidity conditions, exaggerated by light summertime staff played a big part. The fact that bond yields and USD were relatively muted, highlights the liquidity nature of the $70 collapse within less than 10 minutes.
But Friday's stellar US jobs report will likely trigger fresh selling bouts in metals in the days ahead. +900K NFP combined with larger than expected fall in the unemployment (from 5.9% to 5.4%), over 119K in upward revisions and 0.4% in average hourly earnings m/m, raise chances that Fed tapering of asset purchases will begin in Q4.
Rather than persistent selling at the lows, gold will likely see offers hitting rebounds. We saw such activity exactly this same time last year, days after gold hit its record highs. The question then becomes whether we will see a break below 1600, similar to the breakdown of 2013-2014.
Learn more about Ashraf Laidi at AshrafLaidi.com.
