While President Theodore Roosevelt’s statement “the date that will live in disrepair” certainly does not apply to August 9, 2021, it is a date that professional gold traders will remember forever. Before the opening of gold trading in New York, it was clear in Asia that a big move in gold was starting to happen. It was a perfect storm as there was very poor liquidity amplified by the fact that the Japanese markets were closed for a public holiday and the markets are usually illiquid during the Asian trading session.
“Flash Crash” is set
Gold opened at $1,807 on Friday, August 8 and selling pressure drove gold prices down $63 to close at $1,764. Selling pressure started in Asia and then London opened at $1,764.80 on Monday 9th August. Gold fell 4.5% at the Asian opening before bouncing 3.6% off the lows at the European opening. The net result was a crash that took gold from its opening at $1,764 to an intraday low of $1,678.40, a drop in price of $80 in one day.
Gold compensated for the majority of its decline during the day. Although gold fell $60 in a matter of minutes, gold prices bounced back from the initial decline and closed at $1,726. While there have been other occasions where gold prices have fallen dramatically, this is the only occasion where gold fell by $60 in a matter of minutes and recovered more than half of the drop in a single day.
The main events that led to the rapid crash were the better than expected non-farm payroll report. Economic forecasts were expecting 870,000 jobs to be added and the actual number came in at 943,000. Concurrently, the unemployment rate went from 5.7% to 5.4%. It was widely believed that President Powell would announce the beginning of the tapering off at the Jackson Hole symposium. Combined, these factors provided a backdrop that made the sudden collapse possible.
The reason why today’s article focuses on the quick crash is the low of $1,678.40 that was achieved on August 9, 2021. That lower value matches today’s low of $1,678.40 which is why all my daily gold charts marked this price point during the month Past as a level of major support.
In offshore trading last night, market participants continued to bid the yellow precious metal lower until it reached a low of $1,678.40 and then used this price point as a springboard to move gold prices higher. In fact, as of 5:30 PM ET gold futures basis, the most active August contract is currently flat at $17.30 at $1717.50 after trading as high as $1719.50.
While the conditions surrounding the recent selling pressure for gold have more differences than similarities to the April 9 economic environment on a technical basis, the rapid crash drop provided a price point that market technicians used as a support level.
While it is clear that the current selling pressure for gold is mainly driven, and based on fundamental events, today’s rebound from the low of the rapid crash confirms that technical levels continue to guide and provide important price points for traders.
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