Believe it or not, there could be a silver lining in the ongoing bloodbath in precious metals markets where, today, losses now exceed the shocking declines of late last week when the gold price tumbled more than $80 an ounce and silver plunged nearly $2 an ounce.
Important long-term technical levels were breached on Friday after futures markets were hit with massive sell orders totaling 400 tonnes of gold in what Ross Norman of Sharps Pixley said “had the hallmarks of a concerted short sale” in this report earlier today.
If this was an engineered short sale designed to take prices lower by triggering stop loss orders, it has been hugely successful as the gold price is now about $200 lower than it was when markets opened on Friday.
So what’s the silver lining in a two-day price decline of almost 13 percent for gold?
Well, however it was that panic selling ensued, one thing that most futures traders probably don’t realize is that they buy and sell “paper” gold and silver for entirely different reasons than the biggest physical buyers of the metal do.
Most futures traders in the U.S. and, to a lesser extent, owners of such gold ETFs as the SPDR Gold Shares ETF (GLD) and the iShares Gold Trust (IAU) tend to sell when the price is going down and buy when the price is going up.
But, the world’s biggest buyers of the physical metal in Asia do just the opposite – they buy when the price goes down.
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