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Gold Crashes 4%, Poised for Sharpest Plunge in Five Months

August 11, 2020 at 14:31 by Andrew Moran

Gold futures are cratering more than 4% on Tuesday as prices are on track for their sharpest plunge in five months. The yellow metal had been on a tear over the last and recording fresh all-time highs this month. Is this the end of gold’s meteoric bull run? Or is this a correction that could present a buying opportunity for those who missed out?

December gold futures cratered $88.20, or 4.32%, to $1,951.30 per ounce at 16:12 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. The precious metal is poised for its worst daily performance since March 13. Gold prices had been trading near record highs in recent sessions, but now the significant slide lowered their year-to-date gains to below 29%.

Silver, the sister commodity to gold, is also plummeting on Tuesday. September silver futures declined $2.151, or 7.23%, to $27.145 per ounce. The white metal had been rallying better than its yellow counterpart, soaring 73% over the last three months. Year-to-date, silver is still up 51%.

So, what is happening in the metal markets?

For one thing, gold had been technically overbought as investors scooped up the asset to shield themselves from price inflation, geopolitical tensions, and a weaker US dollar. There may have also been some speculation as traders on Robinhood might have utilized the metal commodities as a way to make quick profits on the popular commission-free platform.

Investors are bullish on two of the leading US stock indexes on Tuesday after it was reported that Russia might be developing a successful COVID-19 vaccine, and President Donald Trump is proposing slashing the capital gains tax. Although geopolitical tensions remain the same, they may have been offset by expectations that Congress will soon reach a stimulus deal.

A weaker greenback failed to lift gold. The US Dollar Index, which gauges the buck against a basket of currencies, tumbled 0.14% to 93.45, from an opening of 93.60. A lower buck is typically good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

Overall, the sharp downturn could be good for gold moving forward since it could lead to a more balanced long-term rally.

In other metal markets, September copper futures dipped $0.0035, or 0.12%, to $2.859 per pound. September platinum futures shed $31.00, or 3.09%, to $971.70 per ounce. September palladium futures slumped $112.40, or 4.95%, to $2,158.00 an ounce.

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