Gold trades in fast market conditions

Gold futures traded in extremely fast market conditions, reminiscent of fast markets traders witnessed during the historical run from $1000-$1900 in 2011. In the first few hours of gold futures opened this morning $1673.10, from there the market moved a little bit higher, however at 10:15 AM EST gold prices dropped from $1684 down to a low just below $1643 in 15-minutes. From that point the majority of the trading day had a slow but methodical move to higher ground until we got to within one hour of the close. At that point gold began to run sharply higher actually breaking the yearly high when it traded to $1692.80. Then over the last half-hour of trading it not only began to trade lower but for a brief moment actually went negative on the day before quickly recovering.

This type of wild market moves typically only occur when large block orders are placed in the market that have a significant impact on current pricing. As of 3:50 PM Eastern Standard Time gold is trading over three dollars higher at just about $1672.

Considering that it traded the to a low of $1642 and a high of $1692, gold had a $50 trading range in a single day. The unusual component to that range is that the dips and the rallies both occurred extremely quickly within a 15 to 30-minute time parameter. It is for that reason that is highly likely that it was large block trades that move the market in such an extreme manner. While we can expect some real volatility during this time due to the coronavirus it is quite unusual to see the speed at which price has been changing.

The rationale behind today’s higher pricing is clear cut. The coronavirus continues to spread to other countries, as cases continue to mount here in the United States. According to the New York Times cases in the United States have now surpassed 250 with 33 confirmed cases in New York alone. The U.S. death toll has now risen to 14.

Globally confirmed cases now tops 100,000. The death toll is at least 3,015 in china, and an additional 267 death around the world.

The effect in financial market is dire and profound. U.S. equities continue to drop, and for a brief moment today the ten-year Treasury Bond yield fell to the lowest yield ever, down to 0.66%. The Dow Jones industrial average continues to trade lower in triple digits, however the low this morning of 25,226, recovered to a decline of 256 points with the Dow settling at 25,864.

This occurred at the same time that the jobs report was released today by the U.S. Labor Department which showed that 225,000 nonfarm payroll jobs were added last month and the employment rate is at 3.6%. Even that strong report did not change the fears that of this epidemic quickly becoming a pandemic.

Noteworthy was that the Federal Reserve stated that they are willing to do more, and with their next FOMC meeting set for the 18^th of this month traders are expecting a high probability of yet another rate cut then.

It is very likely that we will see gold challenge $1700, and the fact that gold traded to a high today of $1692.20 indicates that that could in fact happen next week.

Wishing you as always, good trading,