The market collapse yesterday fails in restraining gold!
Yesterday saw one of the greatest slumps in US stocks, commodity and forex markets. This crash, however, had no visible effect on the precious metals, as gold climbed noticeably yesterday, reaching a 5 month high.Against the euro, pound, Swiss franc and yen, gold had risen to break previously set records.
The yellow metal had climbed to 942.30 euros, an all time high, due to Mr. Trichet's failure to convince financial markets of the improbability of the Greek crisis spreading to Portugal and Spain. The European Central Bank kept interest rates at their historic low of 1.0%, weakening the euro and pushing investors into buying gold as a safe haven against the depreciating currency.
While against the dollar, gold ascended to 1212.60 which is near the metal's historic high, before closing in New York at 1208.80 with a gain of 2.82% or $33.20. The crash that occurred in the stock and commodity markets forced investors into buying gold as a safe haven and alternative investment. The crash which is presumed to be the result of a trading error or a computer glitch, as investigations are currently ongoing according to what the SEC said; the crash toppled the Dow Jones over 1000 points and diverted investments into gold.
The vast appreciation of greenback and the yen was unable to offset the precious metals' upward surge, though the dollar climbed to the highest since April 2009 to 85.25. Today oil is continuing its three day decline, reaching $74.52 per barrel.
Commodity market followed their equity counterparts, failing however to have an effect on silver and platinum. Platinum gained 0.30% yesterday to close at 1651.00, though the crash ought to have had some effect as platinum is considered an industrial metal. Silver closed at 17.67 up by 0.97%.
Gold was the biggest gainer yesterday, as demand was bolstered by pessimism in the markets and worries concerning the European debt crisis, causing investors to flee into the golden safe haven raising the metal's price, leaving the stronger dollar and falling oil futile in pulling gold down.
Today, we see metals making a corrective downward movement, spurred by profit-taking, while platinum continued its upward climb reaching 1654.00 at exactly 2:47am EST. Silver fell by 0.11% this morning and currently trading at 17.65, while gold has slipped by 0.51% to 1202.60.
The steep drop in gold's price, surpassing silver's drop, can be explained by speculative profit-taking after the significant rise it experienced yesterday. Although trading is expected to be turbulent, the general short-term trend is seen positive, with a possibility of new records for gold. It is worth to mention that markets await important data from the U.S., such as the labor report, as this data is bound to affect markets and add turbulence to trading.
The investigation into yesterday's possible trading error is expected to have an effect of the market, enforcing great fluctuations, thus we suggest caution to be implemented today.