A recent storm slammed into the precious metals, making the market look a lot more similar to the highly volatile cryptocurrency market. The sharp selloff left gold prices more than $100 less per ounce in only minutes, and silver dropped by an even larger percentage overall.
The plunge took out stop losses and crushed traders and investors alike, but many saw the bloodbath as a buying opportunity. This is evident by the massive wick left on the XAUUSD and XAGUSD price charts. The wick also runs deep into a former resistance zone flipped support that could at the same time act as a retest and confirmation of a massive bull flag.
If the pattern is valid, the target of the technical structure based on the measure rule would project prices around $2,800 per troy ounce. It also might suggest that the gold bull market isn’t yet over, nor has the silver bull run officially begun.
The below guide will explain how to trade gold online, and how to do it effectively even though the market is highly volatile right now.
To put the severity of the recent selloff in precious metals into perspective, these assets are typically listed by forex trading platforms alongside currencies like USD and EUR with similar amounts of leverage. Leverage is commonly found in forex markets because these assets typically make much smaller movements. Leverage amplifies the power of account capital by using it as collateral for larger positions, which allows traders to still reliably profit from less volatile assets.
A 5% move in forex is especially shocking and rare, yet silver alone plunged more than 13% in around 48 hours. Gold fell roughly half that amount, but that could be due to a large amount of leverage in silver markets especially, due to increased interest in that asset from the WallStreetBets community.
What was also especially shocking, was how fast the worst part of the plummet happened. Spot gold bullion prices dropped more than 4% alone in only minutes. Marcus Garvey, head of metals strategy at Macquarie Group Ltd. says that “better-than-expected employment data accelerated a selloff at the start of trading.” Garvey also says that holidays in Japan and Singapore contributed to particularly low liquidity conditions that left traders vulnerable to the collapse.
Gold And Silver Flash Crash Resembles Bitcoin On Black Thursday
A long red wick into support is all that is left of the carnage, along with the shocking stories traders have to tell who watches this all take place live. The plunge was highly reminiscent of cryptocurrency volatility, in particular, what it was like to hold Bitcoin during the Black Thursday crash in March 2020.
The example itself is important to note, as it was indeed a buying opportunity despite it being one of the bloodiest days the market had ever seen. From the bottom that day to the top of the bullish impulse that resulted, Bitcoin rose from $3,800 to $65,000 per coin. Gold won’t see anywhere near as much momentum in price appreciation due to the trillions in market cap that already exists and the scale of the massive market, but a reasonably bullish move is expected in gold.
In fact, not only does the plunge look like Black Thursday, it retested the resistance trend line turned support in a massive, year-long bull flag that might only now be ready to move up with a second retest and confirmation holding. Such a retest of resistance turned support is highly bullish and a signal to the market that the asset is ready to move up. There is also a bullish divergence brewing on the Relative Strength Index.
Buying The Blood In The Streets When The Market Is Most Fearful
The collapse in metals, and the fast recovery is the perfect example of why contrarian traders and investors are often the most successful. The likes of Baron Rothschild and Warren Buffett have all advocated buying when others are fearful or selling when the masses are greedy.
There are few more fearful moments than the plunge experienced recently, and because so many positions were wiped out and stop losses triggered, the market cleansed all existing positions so that new ones could open. This reignited volatility and also caused a reset of traders seeking to get repositioned based on the latest technical structure.
Anyone who was able to long the XAUUSD or XAGUSD trading pairs at the bottom of the plunge might have caught the generational bottom in precious metals, before the most epic bull run of our lifetimes. With prices still so much lower than former all-time highs, it may not yet be too late to get into position.
Although the sentiment is highly bearish on metals due to cryptocurrencies and the high-risk environment created due to stimulus money, smart investors are getting exposure to gold and silver to protect from the coming hyperinflation. Inflation has already hit most commodities, but metals have yet to follow. This has only added to the bearish sentiment, but things always seem the worst right before a reversal.
Gold and silver remain two of the most respected financial assets globally and deserve a place in any investor or trader’s portfolio. PrimeXBT offers CFDs on gold, silver, oil, crypto, and more, all under one roof. CFDs on margin let traders go long or short on more than 50 different trading instruments, using accounts based on BTC, ETH, USDT, and USDC.
PrimeXBT includes built-in technical analysis tools so a plan can be created, and a strategy followed through to execution. For traders who continue to fail, but want to gain exposure to precious metals, they can also consider the Covesting copy trading module, which connects followers with strategy managers who do the heavy lifting for them.
Followers get to copy the trades of strategy managers who have the skills to see the collapse coming, and the courage to get into position even when the market is most fearful. Regardless of the option chosen, there are many ways to trade the historic metal meltdown going on across the market right now.