(Kitco News) – The price action in the gold market has turned from bad to worst as the precious metal dropped to a new low for the year at the start of the Asian trading session.
However, some analysts see the price action as a major buying opportunity as they expect central banks will be slow to tighten monetary policy.
December gold futures lost nearly $100 as Asian markets started to open up. Although the precious metal is well off its lows, it is still seeing some selling pressure. December gold futures last traded at $1,742.40 an ounce, down 1.17% on the day.
Since Friday morning, gold prices have lost $76, one of their biggest losses since markets were first roiled by the COVID-19 pandemic in early 2020. Better-than-expected employment data sparked the latest selloff in gold.
Friday, the U.S. Labor Department said that 943,000 jobs were created in July, handily beating consensus expectations of 870,000 jobs. At the same time, the unemployment rate fell to 5.4%, down from 5.9% in June. Wages also rose more than expected in July.
After gold’s drop below initial support at $1,790 an ounce, many analysts said that gold could test major support at $1,690 an ounce. However, many weren’t expecting that target to be reached by Sunday.
Some analysts have said that Sunday’s major selloff was due to a massive sell order executed in a low volume environment.
“I think the idea that interest rates might have bottomed is causing some to want to dump their inflation bets in metals, which has led in Sunday evening thin trade to a washout,” said Ira Epstein, director of Ira Epstein Division of Linn and Associates, in a note Sunday evening. “It looks like a firm doing a blowout of trade due to margin along with very thin trade volume is behind this.”
According to comments on Twitter, many analysts see gold’s drop as a significant buying opportunity.
Looks like folks in Europe think CPI will come in cool this Wednesday. I may yet get some stink bids on #gold and #silver #stocks filled… Buckle up boys & girls, it’s going to be an interesting week! pic.twitter.com/T3XQV76JmZ
— L (@duediligenceguy) August 9, 2021
The trade with gold & silver is pretty straight forward here. If you believe Fed will get ahead of the curve or at least in line with it w/ regards to inflation then sell. If you think Fed will crab walk their tightening, then this selloff is a gift. I believe in the latter.
— Peter Boockvar (@pboockvar) August 9, 2021
Best trade on the planet right now with “QE infinity” and a complete abnormality in the G/S ratio is $Silver. I’m tipping likely to outperform almost anything in the next 12-24 months on a resurgence in investment demand. #gold/#silver ratio 20 year chart below is incredible: pic.twitter.com/pqZUNFWDeT
— John Feeney (@JohnFeeney10) March 30, 2020
Independent futures trader Adam Mancini said that he is not surprised to see gold’s washout as it broke significant support after failing to break resistance at its 200-day moving average.
Additional notes: If $1690 fails from here its a long way down to $1575 next major support. As posted bulls will need to recapture some levels to confirm a bottom. $1750 a good start, but getting back above $1770 would be massively bullish now and trigger a new leg higher
— Adam Mancini (@AdamMancini4) August 8, 2021
Fred Hickey, creator of the High Tech Strategist newsletter, called the selloff in gold a “pure manipulation play, meant to try to stampede real physical gold owners.”
“I won’t be a victim of their attempts to drive prices lower,” he added.
On the other hand, this manipulation will create a genuine, washed-out bottom for the correction that began off record highs of a yr ago. A correction that’s not unusual following a record high. In long-run these attacks have been to my benefit – as I believe this one will be too
— fred hickey (@htsfhickey) August 8, 2021
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