Gold Plunges the Most in Four Weeks With Dollar Extending Gains
Comment of the Day

February 04 2021

Commentary by Eoin Treacy

Gold Plunges the Most in Four Weeks With Dollar Extending Gains

This article by Yvonne Yue Li for Bloomberg may be of interest to subscribers. Here is a section:

“Looks like there’s some liquidation so far this morning,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets. “The dollar is slowly grinding higher, 10-year Treasury yields are back up. Longs are very disappointed that gold never broke above key resistance at $1,860-70 even as silver soared.”

Bullion for immediate delivery fell 2.4% to $1,789.88 an ounce at 11:16 a.m. in New York. The metal dropped as much as 2.7%, the most since Jan. 8. Spot silver slid 2.7% while platinum and palladium also declined.

The wild ride in silver fueled partly by retail investors is abating for now. Last week, posts on Reddit’s WallStreetBets forum initially called for a “short squeeze” of the metal, and that snowballed into a buying frenzy through exchange-traded funds and physical markets. But sentiment shifted after CME Group raised margins, causing prices to swiftly decline, and the volatility is being scrutinized by U.S. regulators.

Eoin Treacy's view

The demand for gold from those who were buying as a hedge against calamity is abating and that has contributed to the correction which began in August and continues today. Gold dropped below the $1800 level and is now testing the low from back in December. A clear upward dynamic will be required to signal a return to demand dominance.

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