Gold prices rebounded Thursday following a fluke "flash crash"
the prior session that erased all of last week's gains.
In intraday trade, spot gold climbed 0.49% to $1,729.20 an
ounce.SPDR Gold Shares (
), tracking a 10th of an ounce of bullion, added 0.49% to 167.36
a share. It's trading below its short-term, 50-day moving average
but has only corrected 3% from its 52-week high, which is
The massive sell-off Wednesday morning sent gold prices down
2% right after the market opened. Prices rebounded from the
morning low the rest of the day, leaving bullion down 1.3%.
Traders blamed the sell-off on a massive sell order for 7,800
contracts entered at 8:20 am Eastern Time. That may have
triggered automatic stop losses, setting off a flurry of sell
orders. Short sellers, or those betting on falling prices, had to
close or "cover" their positions by buying back shares, which
drove prices back up.
"This selling was a 'bear raid' by what some are calling a
'nefarious' force intent upon finding stop orders along the way
into which the short position could be covered," Dennis Gartman
wrote in "The Gartman Letter" Thursday.
"Two things are of interest here: The Indian banks were closed
yesterday, and without the Indians in the market, any attempts to
frighten the longs had a far better chance of working than
usual," Gartman wrote. "Secondly, the gold stocks held quite well
despite this 'flash crash' in bullion and the
Wednesday also happened to be "roll day" in the futures
markets, in which traders have to sell their expiring contracts
and buy new ones to maintain their exposure to gold.
What's most important is what happens after initial trade,
says Don Vandenbord, whose firm is invested inProShares Ultra
Silver ETF (
) and SPDR Gold Shares. He's a portfolio manager at Camarda
Wealth Advisory, in Fleming Island, Fla., with $250 million in
assets under management. Silver has recovered all of yesterday's
loss and gold bounced high off yesterday's lows.
Anthem Blanchard, CEO of Las Vegas-based Blanchard Vault,
which stores and sells bullion, attributed the selling to
traders' reaction to fiscal cliff negotiations in Washington.
"If the fiscal cliff isn't averted, capital gains taxes on
gold and silver held for more than a year will jump from 28% to
33%, and clearly some holders unloaded long-held positions to
avoid that outcome," Blanchard wrote in an email. Gold and silver
ETFs are treated as "collectibles," in which capital gains are
taxed at 28% vs. 15% for stocks.
Market Vectors Gold Miners ETF (
) ticked up 0.08% to 47.94 Thursday. It plunged as much as 3.8%
intraday Wednesday but bounced off its morning lows to end the
session ahead 0.93%. GDX is building a base while trading in a
tight range near its 200-day moving average. It has to break back
above its September high of 55.25 to trigger a buy signal, said
Market Vectors Junior Gold Miners (
) rose 0.13% to 21.81. It fell 3.9% at the open Wednesday and
spent the rest of the session rebounding to end down just
Silver prices surged 1.72% to 34.45 an ounce, winning back all
of the prior day's losses plus some.IShares Silver Trust (
) gapped up 1.87% to 33.23 -- a six-week high. It's trading above
both its 50-day and 200-day moving averages, which shows a strong
Vandenbord owns SLV with a stop loss below Wednesday's low at
31.91 a share. He believes gold prices could double over the next
two years and silver could double over the next three years as
the Federal Reserve's quantitative easing programs devalue the
"As long the government can't get its budget under control,
gold and silver are solid investments," said Vandenbord. "You
can't continue multitrillion-dollar debts without paying them
Global X Silver Miners ETF (SIL) jumped 0.97% to 23.00
continuing a rebounding from Wednesday's low.
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