Gold, as well as silver, stood out among other assets during an otherwise quiet Asian session. Gold futures launched a new week little changed, near the $1,760 mark. However, a strong selling started shortly before midnight (BST time). Gold price slumped around $80 during the next half an hour, and tested $1,680 area - the lowest level since the end of March 2021. There were no fundamental news that would justify such a steep drop and the move was reasoned with a forced liquidation of large futures position. Media claim around that time 24 thousand futures contracts on gold were sold at-the-market, representing 2.4 million troy ounces of gold. Combination of such a large at-the-market sale with thin liquidity conditions at the beginning of weekly futures trade has triggered a massive drop. However, gold price has almost fully recovered from the drop by now and trades near a local low from late-June in the $1,750 area.
Taking a look at GOLD from a technical point of view, one can see that gold has been moving lower at the end of the previous week as well on fears that Fed will announce tapering soon. Precious metals realized the range of a double top pattern from the second half of July. A drop below the $1,750 area may have triggered a number of stop loss orders what have contributed to a big plunge. Nevertheless, price reacted positively to the $1,680 support area and subsequent quick return towards the $1,750 zone suggests that today's overnight flash crash may not have a major impact on the long-term outlook.
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Source: xStation5
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