Did you buy the flash crash? – .

Did you buy the flash crash? – .

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(Kitco News) – Summer has been relatively calm for gold, but things are starting to heat up again as we wrap up a hectic week. The excitement began early Sunday when a trader sold 24,000 futures at the start of the Asian trading session.

Trading activity during Asian hours is low at best, due to summer trading conditions, and a large order can have a huge impact. Suddenly $ 4 billion of gold was sold and prices at one point fell by more than 4%.

However, there is a lot of resilience among precious metals traders. Many saw the flash crash as an opportunity to buy at a discount. Fast forward to today, gold not only recovered from Sunday’s sell-off, but ended the week with a gain of around 1%.

Some analysts have said the sell-off and the rebound that followed created one of the most bullish technical pictures a trader could want. Gold prices were set for the week at $ 1,780 an ounce. Analysts will be eager to see if prices can climb back above $ 1,800 an ounce next week.

In an interview with Kitco News, William Cai, partner at Wilshire Phoenix, said that the gold flash crash did not change any of the fundamental drivers behind gold. He noted that gold would continue to be supported by mounting inflationary pressures and continued government spending.

Interestingly, that same night as gold collapsed, the US Senate passed a $ 1,000 billion spending bill that included $ 550 in new spending initiatives. Later in the week, the Senate also passed framework legislation to advance the government’s broader $ 3.5 trillion spending plan.

A lot of money continues to flow into the US economy, which will continue to support gold prices.

Anna Golubova of Kitco News covered a Bloomberg Intelligence report, and they remain bullish on gold as it recovers from recent lows.

Senior commodities strategist Mike McGlone and author of the report said gold is still on track to fall to $ 2,000 an ounce.

“A potential catalyst for gold to reach resistance of $ 2,000 an ounce is a bit of stock market reversal and continued decline in US Treasury bond yields since the peak in March,” he said. declared. “We see gold more likely to approach $ 2,000 resistance than to hold below $ 1,700 support in 2 hours. “

New focus on gold is also timely as the market prepares to recognize a critical milestone. Sunday August 15 will mark the 50th anniversary of President Nixon’s closing of the “golden window” and the end of the Bretton Woods agreement.

Although not an official gold standard, the Bretton Woods Agreement made the U.S. dollar the world’s reserve currency, and gold was pegged to the U.S. dollar at $ 35 per ounce. Due to rising inflation, nations around the world were rapidly exchanging their US dollars for gold.

According to George Milling-Stanley, chief gold strategist at State Street Global Advisors, these buyouts put the creditworthiness of the United States at risk, so Nixon was forced to decouple the US dollar from gold.

Gold overnight went from a global currency to an ordinary commodity; however, analysts note that over the past 50 years, the precious metal has remained a relevant asset in global financial markets and a proven store of value.

While a new gold standard is unlikely to emerge anytime soon, some analysts are not ruling it out.

“For thousands of years, gold has been used as money, and we’re only talking about the last 50 years,” said Thorsten Polleit, chief economist at Degussa. “I think it would be foolish to think that we can always rely on non-backed paper currencies. “

It’s all for this week. Have a good week-end

Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. It is not a solicitation to effect an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.

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