At the beginning of the U.S. session on Monday Beijing Time, spot Gold and silver suddenly plunged. As of 21:45, after COMEX futures gold fell below 1710, spot gold also fell below the $1710 mark, touching a two-week low, down 1% intraday; COMEX futures silver fell 2% intraday and is now at $24.59/oz. Spot palladium fell 5% intraday and is now at $2536.73/oz.
The U.S. stock market also opened lower, led by bank stocks, with Morgan Stanley down nearly 4%, UBS down more than 3%, Wells Fargo and Citigroup down more than 2%, JPMorgan down nearly 2% and Goldman Sachs down nearly 1%.
Last Friday’s blowout by well-known fund manager Bill Hwang stirred up a thousand waves, with the bigwig’s fund Archegos Capital Management dumping $30 billion in stocks, which made some investors worry about the spread of the crisis. On Monday, the SEC said it was monitoring the status of the Archegos fund.
As Golden 10’s analysis earlier today pointed out, this U.S. stock sell-off crisis may not be over yet. Judging from the size of Archegos Capital’s leverage, Bill Hwang may still have billions of dollars of positions to close out. In addition, a number of implicated hedge funds may also be involved in this sell-off storm.
For bullion investors, this wave of U.S. stock selling could create some trading opportunities, writes Jim Wyckoff, senior analyst at Kitco.com.
“If the market sell-off spreads, the gold and silver markets could see buying soon.”
However, Monday’s plunge in gold and silver early in the U.S. session is believed to have surprised many investors, which is usually one of the most liquid times of the day. Analyst Wyckoff believes that in addition to the U.S. stock market, the recent strength in the U.S. dollar index will remain a negative factor for the metals market.
As of press time on Monday, the U.S. dollar index maintained a high level of oscillation with modest gains during the day.
Bart Melek, head of global strategy at TD Securities, said he is not surprised that gold has not yet broken out of its upside range, as the dollar continues to hold firm and this will remain stable for the next while, as the setback in the European vaccination campaign could lead to a blockade in the region and funds could flow to the dollar. In the long term, there is uncertainty in the market.
On the other hand, ForeLive analysts write that higher U.S. Treasury yields are also weighing on gold prices. Early in the U.S. session, U.S. bond yields climbed rapidly from the lows hit on Friday, with the 10-year U.S. bond yield up 2% at press time.
Forelive analyst Adam Button writes that this selloff in gold may also be related to technical trigger stop orders, with traders setting a series of stop orders at various lows over the past few weeks. The VIP pending orders report ahead of the Gold 10 U.S. session also showed that spot gold was under heavy selling pressure with dense short orders around 1723, 1719 and 1715.
However, Adam Button also noted that in the bigger picture, as long as the March low of $1,676 holds, gold prices could bottom in the coming weeks.
It is worth noting that this Friday is Good Friday, commodity markets, U.S. stocks will be closed, when market liquidity will become light, we need to be alert to the risk of volatility amplification.
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