How the gold market was crashed

The physical market for gold sees this massive stop loss explosion as a gift and gets ready to make their move to buy up the gold on the cheap.

Now comes the part that is pure genius or a total coincidental thing that just so happens to be a gift to those who are short the market and those who would be responsible to deliver gold should the inventory deplete.


The screens all freeze.

What does that mean?

No one can get to the physical market to buy at these low prices but at the same time, they can’t sell or protect their positions either. The system is frozen. Yes, just like at Bit-coin. The system locks up. And of course the results are going to be the same, just on a lower percentage level.

What can the physical holders do?

Meanwhile the futures market continues to drop.

So what happens? The physical market holders begin to panic. How can they protect themselves as they can’t sell either?

What would you do if you were in that situation?

There is only one solution, especially during a panic. Short and ask questions later.

Therefore it is my speculation that based on 350,000 contracts sold on Friday and the massive drop in price; some of those contracts were a result of the physical market having no choice but to enter into the futures markets to hedge their physical position holdings by selling contracts or shorting the market.

Their choice was either this solution, or wait until Monday and be subject to potentially heavy losses should margin calls go out over the weekend. With no time to think and survival instinct kicking in, the physical holders most likely did what they could to protect themselves. They went in and shorted the futures market.

At this point the market goes into a free fall as the physical market can’t buy at these low prices because the computer system is down; they can only sell futures to hedge their long physical holdings and so they do what they have to and begin selling futures.

Now it gets worse. As the price drops even more, underfunded players are getting wiped out and now they begin to liquidate. The market goes into a total collapse as all the stops below $1,500 get tripped up and the market tanks to $1,490.

The market finally closes in New York and returns to the $1,500 area.

But it’s not over. There's another situation going on. The weekend is arriving and players begin wondering about margin calls. How are holders going to get money to their brokers over the weekend for the Monday trade session?

But there is not enough liquidity as the COMEX has closed and only the aftermarket GLOBEX is there to execute trades.

Without a doubt, the shorts know exactly what is about to transpire.

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Originally published on Resource Investor. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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