The price of gold reached its lowest since March, dropping below $1,700/0z on the 9th of March.
As Gold declines, Bitcoin remains strong as each coin is currently worth about 36 ounces of gold.
In addition to losses recorded in the past week, the value of gold declined further earlier today as Bitcoin remains strong and gradually rebounds. A flash crash triggered the loss, causing the price of gold to reach its lowest level since March. The price of gold dropped below $1,700/oz on the 9th of August.
Gold flash crash
After gold saw its nearly 6-month low, the precious metal has recovered slightly. At the time of writing, gold trades at $1,745/oz. The precious metal had diminished by 14.6 percent over the past year when it topped its all-time high, just below $2,040 in August last year. Also, the valuable metal has plunged 8 percent since the beginning of the year and lost 8.7 percent since it traded above $1,900/oz towards the end of May.
According to forex trader and chart guru Peter Brandt, the gold crash was caused by wholesale liquidation. In a tweet, the trader added:
This has all the finger prints of a bank/brokerage house conducting forced liquidation upon a huge leverage speculator.
Speaking further on gold’s price crash, Brandt mentioned heavily leveraged traders, noting that the leverage ratio on Chicago Mercantile Exchange’s gold market is about 15:1.
On the other hand, the UK-based trading firm City Index said the crash in the value of gold is caused by “stop-loss related selling in very thin market conditions.”
According to a report by the Bureau of Labor Statistics, the employment rate in the US has dropped from 5.9 percent to 5.4 percent. The unemployment rate signifies a new low since the pandemic started. In this light, City Index stated:
The better jobs data sent the US dollars and US bond yields higher, never a good formula for commodities.
Bitcoin remains strong as gold declines
The gold price crash triggered the crypto community, who usually compare the precious metal to Bitcoin. The flagship cryptocurrency has managed to make gains as gold suffered losses, breaking out of a three-month price slumber. Furthermore, the top cryptocurrency has crossed the $40,000 price level and is now positioned for further price gains.
Although Bitcoin has lost over 28 percent of its value since hitting its all-time high, it is trading at $43,703. The price of one Bitcoin is currently worth nearly 26 ounces of gold. When BTC recorded its highest price ever of $65,000 in mid-April, the cryptocurrency was worth 35 ounces of gold. Despite the reduction in the price of Bitcoin, the cryptocurrency has performed excellently since the year began, compared to gold. As of January 2021, one Bitcoin equaled 15.5 ounces of gold.
As gold plummets, the price of Bitcoin and other crypto-assets may continue to grow as investors lose confidence in the valuable metal.
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