Bulls Leave Gold up Again, After New High and Storm of Volatility

By Barani Krishnan

Investing.com - The thrills and spills of the gold market are being laid bare as bulls refuse to let its upward momentum subside, sending the yellow metal to another positive close on Tuesday after it briefly plunged amid the chase for $2,000. 

A storm of intraday volatility has descended on precious metals markets, including silver, after gold shattered the $1,900 ceiling the first time in nine years on Friday, setting successive record highs in the two sessions since.

In Tuesday’s trade, gold futures on New York’s Comex settled up $13.60, or 0.7%, at $1,944.60. Earlier in the day, during Asian trading, it surged to an all-time high of $1,974.40 — barely $25 from the $2,000 target — before plunging to $1,900.70 at one point.

Spot gold, a real-time indicator of trades in gold bullion, was up $9.33, or 0.5%, at $1,951.90 by 2:24 PM ET (18:24 GMT).  The session peak of $1,981.13 set a new record high for bullion.

Silver had its own drama. Futures on Comex tumbled 20.1 cents, or 0.8%, to $24.30 after a meteoric rise to eight-year highs of $26.262 and a jaw-dropping fall to $22.298.

“I suspect liquidity and itchy trigger fingers played their part,” Jeffrey Halley, the Sydney-based analyst for New York’s online brokerage OANDA, said, recounting how nerves were frayed during a 30-minute roller-coaster ride that have happened “for no apparent reason”.

Sunil Kumar Dixit, another independent analyst and technical chartist on precious metals, said he expected gold to witness some correction if it slid below $1,933, revisiting $1,900.

“A close below $1,900 would signal a bearish reversal top, which means correction for a day or two,” said Dixit. ”Gold is in clear uptrend so corrections and consolidations are considered as energy gaining for yet stronger leap. Buying on dips in value areas is a good idea.”

Halley said a fall through to $1,835 on gold or $24 on silver could trigger another “fast money stampede for the door." 

Halley cautioned investors to be particularly wary of silver, which had plenty of opportunity to go either way.

“Silver is a savage mistress at the best of times, with liquidity usually evaporating on aggressive uni-directional movers,” he said.

The gold rally comes on the back of low interest rates and trillions of dollars of Covid-19 stimulus passed by governments and global central banks that have debased the dollar and other conventional currencies and heightened inflation fears — a situation which investors typically hedge by buying gold.

Republicans led by President Donald Trump have finalized the fourth coronavirus relief bill, worth about $1 trillion, that will provide temporary and reduced extension of unemployment benefits, another round of stimulus checks, liability protection for businesses and funding to help schools restart. It will also include $16 billion in new funds for testing and tax incentives to encourage companies to rehire employees.

The Dollar Index, which pits the greenback against a basket of six competing currencies, has slid from 17-year highs of 103.96 in March to a two-year low of 93.42 now. The index has lost 3.8% in July, its most since April 2015.

Get The App

Join the millions of people who stay on top of global financial markets with Investing.com.

Download Now