Gold bulls work to stabilize price after overnight "flash crash"

(Kitco News) - Gold and silver prices are lower in early U.S. dealings Monday, with gold overnight careening to a more-than-four-month low of $1,676.40, basis October futures, and silver slumping to a more-than-eight-month low of $22.295, basis September futures. However, prices are trading well off their daily lows as the market appears to have stabilized—at least for the moment. August gold futures were last down $15.50 at $1,745.00 and September Comex silver was last down $0.346 at $23.98 an ounce.

The metals are still feeling the reverberations of last Friday's surprisingly strong U.S. jobs report that pushed the U.S. stock indexes to or near their record highs, rallied the U.S. dollar index, pushed the U.S. Treasury yields up (prices down)—all bearish elements for the metals. Gold and silver did quickly recover from their "flash crash" overnight lows and are trading near session highs, but still down on the day. The jobs data Friday immediately set off heightened speculation the Federal Reserve would act sooner to reel in its easy monetary policies. That really spooked the metals markets bulls. Apparently, the metals traders on this day are choosing not to focus on the bullish inflationary implications of rebound in the U.S. economy that is already seeing consumer and producer prices on the rise.

The overnight flash crash in gold and silver prices may also be due to thin trading conditions overnight amid the summertime doldrums. Many traders are on vacation and much of Europe is on holiday during August. Many times the "big boys" like the investment banks will make very big trades in low-volume futures trading conditions, in order to get the maximum bang for their buck, and that may be what happened overnight.