A Wild Ride for All

Regardless of what financial markets you follow, today you witnessed one of the most volatile days ever on record. The Dow Jones Industrial Average traded 1600 points lower midday before recovering slightly, closing down over 1100 points on the day. Today’s price decline represents the most substantial intraday point drop for the Dow in history. Today’s drop represents the largest single-day drop since December 2008. The combined losses of Fridays and today’s trading resulted in an 1800-point drop in the Dow.

Gold futures had been trading under pressure at the beginning of the day as traders were selling any asset class to cover losses in U.S. equities. However, as the equity market traded to new intraday lows, investors and traders began to move their capital into safe-haven assets such as the dollar and gold.

As of 4:00 PM Eastern standard time, gold futures are trading up $3.60 at $1341 per ounce. Even during the morning, physical gold was trading nominally higher and overcoming dollar strength which was prevalent throughout the trading day.

Currently, spot gold is fixed at $$1337.30, which is a net gain of $5.40 on the day. On closer inspection, traders bid up the precious yellow metal today by $11.65. A strong U.S. dollar accounted for a $-6.25, resulting in a total change of just over five dollars on the day, according to the Kitco Gold Index.

With recent dollar strength, gold has held its value quite eloquently. The massive selling in U.S. equities has caused many investors to liquidate not only equity positions but any other hard assets to raise cash over the last two days. However, in the last few hours of trading, we saw a flight back into safe-haven assets such as gold.

Many analysts have pointed to a new chairman heading up the Federal Reserve and the potential for a more hawkish Fed as the overall major catalysts that instigated this current selloff. Although that could easily be the trigger that started the massive selloff, we could just be witnessing a market that moved up too far and too quickly without any retracements finding an equilibrium that can only be created by a selloff.

The bottom line is the last few trading days in equities, both in the U.S. as well as globally, should be extremely bullish for gold. This could be the catalyst that moves gold back into a solid rally mode, moving prices above the recent highs of $1370.

Wishing you as always, good trading,