The recent plunge in the price of gold took many, including your truly, by surprise. Well, the timing of the 2.2% drop in the price of gold on Monday, July 20th wasn’t expected – as any flash crash should be. But it’s no surprise to see gold prices suddenly plummet or spike by several percentage points in a single day.
In fact, from the quick review over the past four and half years, between 2011 and 2015, the price of gold fell by more than 2% in a single day 37 times. And rose by more than 2% 34 times. So for a total of 71 days out of 970 trading days or 7.3% of the time the gold market experienced a sharp fall or spike in prices. But there is a difference this time: The price of gold tumbled by around 4.2%, according to some reports, within seconds on late Sunday – a $50 fall. Following this crash there was a correction and the price of gold “only” shed $25 off its value.
So what was the cause this time around?
Some outlets suspect it was because “someone” flooded the market with five tons of gold in the Chinese market. It could also be related to the expected low volume of trading in the markets that enabled this sudden tumble in gold prices.
Even the gold ETF GLD experienced a 1% drop in its gold holdings to 689 as of July 21st – its lowest level this year.
The recent fall in gold prices may have been a flash crash caused by speculators, but considering the ongoing negative market sentiment in the bullion market in recent weeks and the ongoing recovery in the USD against other currencies, it’s no surprise to see gold prices fall to a new low. The bears are likely to keep celebrating on this precious metal.
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