- Prices of Gold flash crush during Asian trading open, taking prices of silver down with it
- Bitcoin continues bullrun to cross $46,000
- US NFP report causes major sell-offs in the USA on Friday. Asia follows suit.
YEREVAN (CoinChapter.com) – Asian markets opened with Monday Blues for fans as international gold rates slumped further following Friday’s sell-off.
A sudden spike in sales of gold futures contracts at the Asian open saw prices fall to as low as $1,677.0 from the Friday close of $1,761.50. That is almost $100 lower than Friday’s closing rate. However, having sunk 4.5%, it bounced back 3.6% as the European session opened.
Soon, scavenger traders, seeing the low prices, entered to buy assets for cheap. As a result, discount shopping helped Gold prices recover slightly, although they remained bearish.
At the time of writing, Gold was changing hands at $1,725.50. In stark contrast, Bitcoin continued its bullish run to cross $46,000, way past the $40,000 resistance it faced last week. With $47,000 in its sight, BTC will look to bull-run to the $50,000 mark it fell to in mid-May.
Gold gets dumped after NFP Report
The Non-Farm Payroll (NFP) report released on Friday painted a rosier-than-expected picture. The US Job Report showed a stark improvement in the US employment rates. In addition, the news released by the US Bureau of Labour Statistics displayed a decline in unemployment rates.
The unemployment rate dropped to 5.4% from 5.9%. This was a more than expected drop, as investors had expected a more conservative fall at 5.7%. In addition, 943,000 new jobs were filled, up from 938,000 in June.
The report indicated that the US economy is improving, accelerating speculations that the US Federal Reserve would initiate tapering of its QE program. The Federal Reserve stimulus is one of the reasons why Gold prices registered a 22% growth in 2020. Quick sell-offs followed the report, causing prices to nosedive.
Prices plung deeper. Monday Effect or a conspiracy?
As the Asian session saw Friday’s fall worsen, conspiracy theories spread. Although the fall could be a typical display of a Monday Effect, the numbers smelt fishy.
The dump saw 24,000 Gold contracts, amounting to 4 Billion Dollars, sold off as the market opened. Considering the prevailing prices at the opening, it makes no sense that someone would consider it a smart time to sell. Was this a forced liquidation by a prime broker or a banking institution to send prices plummeting?
Although unlikely, one can see why conspiracy theorists would want to see foul play. If you have to sell 24,00 gold contracts, by all trading logic, you would do it during a normal trading session and not outside trading hours.
On the other hand, one cannot ignore that Asian markets had already closed when the NFP report was published in the US. Therefore, traders on Asian exchanges could not have sold their holdings when their US counterparts were offloading.
Following the weekend’s closedown, Monday morning was the first opportunity they could react to the events in the USA, thus explaining why Monday’s session saw such huge Gold dumps in the Asian session.
Poor liquidity owing to markets being shut in Singapore and Japan aided in the monumental slump prices.
Gold’s negative performance is nothing new
Much as the Gold prices touch new lows, it comes as no huge surprise. Gold prices have performed badly overall for the past five years. However, in the past year especially, Gold’s performance has been everything but Golden.
The market, in return, has seen a continuous increase in the balance sheet of the Federal Reserve.
A quick comparison of the past ten years between the price of Gold and the Fed’s ever-increasing balance sheet paints a baffling picture. While the cost of the shiny metal staggered, the Federal Reserve’s balance sheet shot through the roof.
In August 2011, the Fed’s balance sheet was $2,872bln, while the price of gold was $1,753. Today, with the gold prices around the same, at $1,729, the Fed’s balance sheet is $8,245bln. Surely, this wasn’t leading to a good place.
Too old for the digital age?
While skeptics like Peter Schiff continue to scorn cryptocurrency, the technology proves once again that it holds the future.
Despite taking a hit, cryptocurrencies are outperforming Gold, which is considered a safer investment. BTC is up by 285% in the past year, while Gold is down by 15%. In addition, the 10-year data shows Bitcoin has gained a whopping 475%, in contrast to Gold’s insignificant gain of 0.01%.
The drop in Gold prices had also caused the price of silver to nosedive. Despite some recoveries, silver remains low at $23.46
Is Gold slowly proving incompatible with the new digital age as millennials shift their trust from Gold to digital currency? The answer perhaps remains to be seen.
In the meantime, the small recoveries for Gold will not prove to be good news unless bulls manage to push its price above $1,800 at least, to signal recovery.