Selling begets selling

Gold continued its downward spiral in today’s trading action, losing $140/oz in bullion’s biggest single day decline since the early 1980s. Word on the Street is that a gold sell order on the magnitude of 3.5-4.0 million ounces was placed at Friday’s open by a brokerage firm on behalf of their client, probably a hedge fund. That’s more than 100 tons of gold! Unloading all of that yellow metal in such a compressed time frame effectively pulled the rug out from under the gold market. The resulting selling pressure drove gold below a strong support level on Friday like a hot knife through butter, which in turn triggered an avalanche of technical selling on Monday. There’s a good discussion of this subject by Ross Norman of Sharps Pixley and you can hear CNBC’s Rick Santelli’s take in this video clip.

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