Gold lost $25 in the span of two minutes this morning on heavy trading volume around 8:42 AM ET.
The yellow metal is now down 2.5%, trading around $1264 an ounce. When it got slammed, it fell as low as $1259.60.
In a note, Miller Tabak chief technical market analyst Jonathan Krinsky writes:
Gold has dropped ~$20 in the past few minutes. While there might be a fundamental reason, we had been watching 1273-78 as a key support level. This represented the low from August 7th, and October 2nd. It also represents the neckline of a head and shoulders continuation pattern. Recall there was a larger “potential” inverse head and shoulders bottoming pattern, but it never confirmed above the neckline. This smaller pattern, however, is currently breaking the neckline, and has downside measured move to ~$1110 - $1120. That would imply a breach of the June low at $1180.
A couple other concerning factors are that price is now back below the 50 Day Moving Average, which is declining once again. Further, momentum is now negative, but far from oversold.
Although Silver is down more on a percentage basis right now (-3.7% vs. -2.2%), it has yet to breach its October low. That level is 20.62. While that is a small salvation to the bulls, it is one level to watch on any further weakness.
If this is a false breakdown, price should reclaim 1273 at a minimum. Since today is Friday, the close will also represent a weekly settlement price, adding to the significance.
The chart below shows the damage:
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