On Monday (August 5th), global stock markets experienced a crash, affecting the gold market. The daily fluctuation of gold prices has reached nearly $95, which is an extremely rare performance.

On Monday, spot gold hit a intraday high of $2458.78 per ounce in the Asian market; Subsequently, the gold price experienced a sharp decline, and during the European trading session, the gold price fell to $2364.19 per ounce, setting a intraday low. Subsequently, the gold price experienced a significant rebound, ultimately closing at $2409.49 per ounce.

As of the close, gold prices fell $32.85, or 1.35%, on Monday.

Analyst Christian Borjon Valencia pointed out that last week's weaker than expected US economic data triggered a global market sell-off, with gold prices in North America falling more than 1% on Monday but rebounding from a six day low of $2364 per ounce.

Valencia wrote that financial markets are beginning to digest the possibility of an economic recession in the United States. Two "bad" reports released by the United States show a significant decline in manufacturing activity at the Institute for Supply Management (ISM), while non farm employment growth fell far short of expectations, which scared investors. Traders expect the Federal Reserve to cut interest rates by 50 basis points at its September meeting.

The US dollar index, which tracks the performance of six currencies against the US dollar, fell 0.50% on Monday to 102.70.

The yield of US treasury bond bonds fell further, and the yield of 10-year treasury bond fell 1 basis point to 3.783%. However, the 10-year US Treasury yield has rebounded from the several week low of 3.667% previously hit.

Global stock markets' bloodbath 'triggers gold sell-off

The price of gold fell sharply on Monday, mainly due to a wider global market sell-off triggered by intensified economic concerns.

The weak non farm payroll data released by the United States last Friday has raised concerns about a recession in the country. After causing a sharp drop in the US stock market, this concern has also spread to global markets.

The US stock market closed sharply lower on Monday, with the Dow Jones Industrial Average plummeting more than 1000 points, the Nasdaq falling 3.4%, and the S&P 500 index experiencing its largest daily decline since 2022. Concerns about a US economic recession have led to a sell-off in global markets. Buffett's reduction in holdings of Apple has added to the selling pressure on the US stock market.

The Nikkei 225 index in Japan closed down 12%, marking the largest daily decline since the 1987 Wall Street crash.

Jim Wycoff, senior analyst at Kitco Metals, said, "Investors were scared and quickly sold everything they could, including gold and silver." At the same time, platinum and palladium used for automotive catalytic converters were also sold, reflecting the market's growing concerns about industrial demand.

Although gold should be able to play a safe haven role during uncertain times, it was not immune to Monday's sell-off as investors sold off assets across the board.

David Meger, Director of Alternative Investment and Trading at High Ridge Futures, pointed out that what was seen in the morning session was a comprehensive pressure on risky assets, and gold was also affected by the same pressure.

But analysts say that given the ongoing economic and political uncertainty, as well as expectations of a Fed rate cut, gold prices, which have risen over 16% so far this year, are still expected to regain their footing in the future. Interest rate cuts benefit the price of gold.

Han Tan, Chief Market Analyst at Exinity Group, said, "The intensification of geopolitical tensions and the hope of a larger interest rate cut by the Federal Reserve will create support conditions for gold prices. Ultimately, once the tension is eased, gold prices are expected to reach a historic high

US military base attacked, Middle East tensions provide support for gold prices

Valencia pointed out that although the gold price fell on Monday, it rebounded above $2400 per ounce at the close. The escalation of tensions in the Middle East has boosted gold prices; The US base in Iraq was attacked by missiles.

Valencia stated that after the assassination of Hamas leaders last week, Israel is waiting for a response from Iran and Lebanon, and the escalating tensions in the Middle East have limited the decline in gold prices. Sky News Arabia quoted Iraqi sources as saying that a US base in Iraq was attacked by several missiles.

On August 5th local time, Commander of Iran's Islamic Revolutionary Guard Corps, Salami, gave a speech on the assassination of Hamas leader Haniyeh in Iran. Salami stated that Iran will respond harshly to Israel at the appropriate time.

Salami said that Israel's assassination of Haniya was a mistake, and Iran will respond harshly to Israel at the appropriate time.

On August 5th, Iraqi military sources said that the Assad Air Base, where US troops are stationed in Anbar Province in the west of the country, was attacked by four rockets that night. Iraqi media reported that two US soldiers were injured in the attack on Assad Air Base that evening.

According to US officials, a military base in Iraq was attacked by rockets on the 5th, causing injuries to several US personnel. The attack is suspected to have occurred at the Assad Air Force Base in Iraq.

On the evening of August 5th local time, an explosion occurred at the Assad Air Base in Anbar Province, western Iraq, where US troops are stationed, and thick smoke was emitted. Currently, no organization or individual has claimed to have carried out this attack.

A spokesperson for the US Department of Defense commented on the incident, stating, "Preliminary assessments indicate that several US military personnel were injured, and base personnel are currently assessing losses

How to trade gold?

Analyst Christian Borjon Valencia wrote that during Monday's European trading session, gold prices fell back to the 50 day simple moving average (SMA) of $2365 per ounce, before rebounding and recovering to $2400 per ounce. Despite the recovery, the momentum still favors the sellers.

After a sharp decline in the past three days, the Relative Strength Index (RSI) is about to turn bearish and break below the RSI neutral line. Once it falls below this level, it may accelerate the downward trend of gold.

Valencia pointed out that if gold prices plummet again below $2400 per ounce, the 50 day moving average may be challenged. Once the moving average is breached, the next support level will be the 100 day moving average of $2340 per ounce, followed by the May 3 low of $2277 per ounce.

Daily chart of spot gold

Valencia added that, on the contrary, if buyers recover $2450 per ounce, the next resistance level will be the peak of $2477 per ounce on August 2nd. If it breaks through the latter, the gold price will aim at a historical high of $2483 per ounce, followed by $2500 per ounce.