We’re talking about the historic plunge of nearly $100 from Thursday’s highs on New York’s COMEX that brought the benchmark April contract from its intraday peak of $1,976.50 an ounce to a session low of $1,878.60.
Half of the drop occurred over the length of the session, as the market settled at $1,926.30. The real jolt happened in the next 60 minutes of after-hours trade.
Source: Eamonn Sheridan. See the long red candle toward the end, representing the drop of nearly $50 on the day.
A mid-afternoon lull in Russia’s aerial, land and sea invasion of Ukraine—along with new sanctions on Moscow by President Joseph Biden that did not torpedo financial markets—blew off a chunk of Thursday’s geopolitical premium in gold.
What stunned many was that a 5% plunge on the day could still happen in a market that had almost everything bullish going for it: US inflation at 40-year highs; a Russia-West showdown unlikely to end anytime soon; and continued weakness in stocks that could divert more funds towards havens like gold.
“The very fact that amidst one of the worst geopolitical military crises, gold witnesses a $98 historic fall, raises questions on where gold is headed actually,” said Sunil Kumar Dixit, commodities strategist at skcharting.com.
Source: skcharting.com
To be sure, there was no lasting damage to gold’s upward momentum from Thursday’s blip lower.
At the resumption of overnight trading after the 5:00-6:00 PM ET (22:00-23:00 GMT) break, April gold was back with its mojo, soaring to an intraday high of $1,925—almost to where it left off at settlement.
Yet, the incident from the previous day serves as a reminder of the wild intraday swings gold was still capable of within its heightened bullish state.
“The second-to-last candle” in Thursday’s session “is not a pretty one for the gold bulls,” economist Eamonn Sheridan remarked in a post on the ForexLive platform.
Sagar Dua, another analyst, concurred in a blog posted on FX Street.
“The precious metal nosedived with much more acceleration than it showed while scaling higher,” Dua wrote.
It’s a dynamic that would serve gold bulls well to remember, ahead of Friday’s Personal Consumption Expenditure Index that could see another inflation spike supportive to bullion.
The so-called PCE Index jumped 5.8% in the year to December, growing at its fastest pace in four decades. For the year to January, economists tracked by Investing.com have forecast a growth of 6%.
Goldman Sachs said on Thursday that the rally in gold could get to a new record high of $2,350, aided by demand for ETFs, on the back of the situation in Ukraine.
At Investing.com, our reading shows gold could go even higher, to $2,500.
But at that point, we could also see intraday reversals of between $100 and $150 from the highs to the lows.
Source: skcharting.com
“Gold needs daily and weekly close above $1,916-$1,921 for a continuation of the bullish breakout, which aims to retest record highs above $2,075 amidst the global crisis,” said Dixit of skcharting in his study of spot gold.
But he also cautioned that a sustained move below $1,916 could push prices lower for a retest of the $1,894-$1,887 levels.
Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.
This article was originally published here.
