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09 Aug 2021
2 min read

Gold Nosedives Over 5%, Silver Down 10% Amid Panic Selling

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Key Takeaways

  • Gold and silver drop significantly in the first hour of trading in the Asian session
  • Traders, however, were quick to scoop up both assets, paring a large part of the losses

Gold Nosedives Over 5%

Gold and silver endured a major decline on Monday, as the initial hours of the Asian session were marked by a heavy selling wave among commodities.

Gold slid as much as $92, or 5.3%, to a two-month low of $1,670 per ounce. Half an hour into the trading session, the precious metal was hovering around $1,760, before bears stepped in and aggressively shorted the commodity.

Silver was also hit less than an hour into the Asian session. A severe 10% drop took the asset from an opening price of $24.31 to a low of $22.06. While it is not entirely clear what caused the significant decline, analysts attribute the drop to the stronger-than-expected jobs data released by the US Labor Department on Friday.

The overhang this morning that led to further losses in gold and silver was a continuation of the weak performance of both metals after the nonfarm payrolls data reported Friday. Low liquidity at the start of trading exacerbated the drop.

Friday’s employment figures showed the US economy added 943,000 new jobs to the labor market. The optimistic report brightened recovery prospects as investors moved away from safe-haven assets like gold and flocked to riskier picks such as stocks.

Against that backdrop, Friday’s weakness in both gold and silver amounted to losses of 2.2% for gold and 3.5% for silver.

Still, spot bullion prices swiftly snapped back after today’s early-hour selloff. Following the $92-loss, gold pared back about $75, or over 4%, to the current market price of $1,746 per ounce. Silver, on the other hand, has regained about $1.80 from the $2.20 it lost earlier today. Silver’s slump brought it to a low unseen since Dec 1, 2020.

European Markets Fare Well

Gold, largely considered as a hedge against inflation, is so far failing to live up to expectations. Given that the latest CPI data showed consumer prices rose 5.4% in June, for the period June to date, gold has lost nearly 9% of its value.

Weighing on the positive sentiment for gold is Fed’s intention to scale back its bountiful monetary support that has buoyed financial markets for more than a year. The swift pace of the economic rebound is another reason investors are backing away from gold.

Meanwhile, the US stock market keeps its foot on the gas pedal. The Dow Jones Industrial Average and the S&P500 on Friday closed at fresh records, while the Nasdaq Composite was moderately lower but still about half a percent from its all-time high set earlier in the month. Futures on Monday point to a slightly lower open.

European markets were also higher to end Friday’s session. Moreover, bourses across Europe had their best week in nearly five months. Boosted by strong earnings reports for the second quarter, bank stocks drove the broader rebound Friday. To start the week, the pan-continental Stoxx 600 is relatively flat but to the upside.

Cryptocurrencies today are mildly lower after another strong weekend. Bitcoin reached a three-month high on Sunday as it spiked to $45,300 per coin. Ether was also a winning performer over the weekend. The Ethereum token’s price surged to $3,200, also a three-month top for the digital currency.

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