Gold Bounces Off $1678; The Low of the August 2021 “Flash Crash”

While President Theodore Roosevelt's remark that August 9, 2021 "will live in infamy" undoubtedly does not apply, professional gold merchants will always remember that day. Prior to the start of gold trading in New York, it was clear in Asia that gold was starting to move significantly.

It was a perfect storm since markets are generally weak during the Asian trading day and the fact that the Japanese markets were closed due to a national holiday made the situation much worse.

The premise of "Flash Crash"

On Friday, August 8, gold began at $1807, but under selling pressure, it fell $63 to end the day at $1764. On Monday, August 9, selling pressure started in Asia, followed by London's opening at $1764.80. At the Asian open, gold lost 4.5 percent before recovering 3.6 percent from the lows at the start of the European session. As a consequence, gold's price crashed by $80 in a single day, falling from its opening price of $1764 to an intraday low of $1678.40.

The bulk of gold's intraday loss was recovered. And even though the price of gold sank by $60 in a couple of minutes, it quickly recovered and ended at $1726. Even while gold prices have fallen sharply on past occasions, this is the first time they have fallen $60 in a matter of minutes and then considerably regained more than half of the loss in a single day.

A nonfarm payroll data that was stronger than anticipated was one of the key factors that caused the flash drop. Economic projections were for an increase in employment of 870,000, while the actual amount was 943,000. The unemployment rate decreased from 5.7 percent to 5.4 percent at the same time.

Furthermore, it was generally anticipated that Chairman Powell would make the tapering start announcement at the Jackson Hole conference. These elements worked as a background together to enable the flash crash.

The low of $1678.40 that was reached on August 9, 2021 is the reason why this essay is concentrating on the flash collapse. All of my daily gold charts have designated that price point over the last month as a level of substantial support since those lows coincide with the low of today, which is $1678.40.

Participants in the international trade yesterday night deliberately drove the price of the pricey yellow metal down until it hit a low of $1678.40 before using that price as a launchpad to drive gold prices upward. In reality, the most active August contract on the gold futures market is now locked at $17.30 at $1717.50 as of 5:30 PM EDT, having reached a high of $1719.50 during trade.

Although there are more contrasts than parallels between the conditions underlying the latest selling pressure in gold and the economic climate on April 9, from a technical standpoint, the bottom of the flash crash gave a price point that market technicians utilized as a support level.

Today's recovery from the bottom of the flash crash indicates that technical levels continue to serve as guides and crucial price milestones for traders, even though it is clear that the present selling pressure in gold is headline-driven and based on fundamental factors.