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Flash Crash Sends Gold to Six-Week Low

June 26, 2017 at 16:53 by Andrew Moran

A “fat finger” and a stronger US dollar helped send gold prices to their lowest levels in six weeks. The yellow metal is poised to snap a three-session win streak, but losses are being capped by political uncertainty in the US and around the world.

August gold futures tumbled $12.40, or 0.97%, to $1,244.20 per ounce at 16:36 GMT on Monday. Gold futures have advanced for three straight sessions and prices recorded a modest 0.1% weekly gain last week.

Silver is also in the red to kick off the trading week. July silver futures dropped $0.11, or 0.70%, to $16.53 an ounce. Silver, too, posted a weekly increase of 0.4% last week.

Both precious metals were impacted by the trading error. At the beginning of Monday’s trading session, 18,500 lots of gold and 5,500 lots of silver were sold in a short period of time. The sale was a mistake and these lots were immediately bought back, but the damage had already been done. The flash crash sent gold plummeting as far as $1,236.

The US dollar also contributed to gold’s decline as the greenback climbed 0.15%. A stronger US dollar is bad for dollar-denominated commodities like gold and silver because it makes more expensive for foreign investors to purchase.

Precious metals were benefiting from international political turmoil. Because of UK Prime Minister Theresa May’s slim majority in Parliament, Brexit negotiations have fueled concerns among investors that Britain’s exit from the European Union (EU) will not be as easy as previously expected. Moreover, the Trump administration in the US continued to be besieged by accusations without evidence of Russian collusion. Italy is becoming a major story as the banking industry, suffering from $335 billion worth of debt, received a jacket from the government.

Nearly two weeks after the Federal Reserve raised interest rates for the third time in six months, comments from US central bank officials suggest that another rate hike could be delayed until December.

If you have any questions and comments on the commodities today, use the form below to reply.

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