DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Gold’s dramatic Thursday selloff erased the yellow metal’s gains since the summer and pushed prices back toward crucial support near $4,000 per ounce. The move unfolded without the usual alignment among gold, the U.S. dollar index and bond yields.

Jesse Columbo, an independent precious metals analyst and founder of the BubbleBubble Report, told Kitco News that he was trying to decipher the market’s unusual behavior. He said the disconnect could reflect more than liquidations tied to weakness in technology shares.

“Very bizarre action,” Columbo said.

“The dollar index is down. Normally you would expect the dollar index to be up 1% on a day like this, and yet it's down 15 basis points.”

The yen strengthened considerably during the session, according to Columbo. He said that could indicate an intervention intended to strengthen the yen, a development that would normally weigh on the dollar and support precious metals.

Instead, gold and other precious metals fell alongside a modestly weaker dollar while bond yields also declined. That combination departed from the relationships traders often expect to see during a sharp metals selloff.

“But today you have precious metals falling along with the dollar – not that the dollar's down that much – and then you have bond yields sinking, but that hasn't given a boost to precious metals either. It's very bizarre behavior.”

Crude oil was slightly higher, but Columbo said the move was not large enough to explain gold’s decline. He pointed instead to several possible forces, including technical pressure, liquidations connected with AI and technology stocks, and risk aversion before the Fed meeting next week.

“My suspicion is [that’s it’s partly] technical, and there's some liquidation related to AI stocks, technology stocks, that could be part of it. Some of it may also just be risk aversion ahead of the Fed meeting next week, in case Warsh takes a hawkish tone again.”

From a technical perspective, gold was approaching an important support range between $4,000 and $3,900 per ounce. Prices bounced from that area during the summer, leaving the range as the immediate test for the market.

“Until it breaks below that, I'm not concerned,” Columbo said. He added that the move could still become a double bottom or another bounce, while stressing that the market was only testing support at that point.

“If it breaks below, we take it from there,” he added. “I don't want to jump to any conclusions. But yes, it's very bizarre, and it just feels overdone.”

The selloff nevertheless erased the earlier advance. “Unfortunately, it gave back that August gain, and retraced the whole move.”

Columbo said U.S. Treasuries appeared to be the main beneficiary of Thursday’s market action. Yet the dollar did not rally alongside Treasuries, creating another mismatch that he said might be explained by yen intervention.

“But often when that happens, the dollar rallies, and we don't have that,” he said. “And maybe that's being offset by a yen intervention. I don't see any news… sometimes they report after the fact, but I suspect that there was a yen intervention.”

Columbo shared a chart displaying known yen interventions since February. He said Thursday’s move looked consistent with the large green vertical bars associated with those confirmed interventions and could represent the beginning of another intervention.

“It looks congruent with those big green vertical bars in recent months,” he said. “Those were all confirmed yen interventions. And then we've got the beginnings of one today.”

He noted that some interventions had occurred back to back, leaving open the possibility of another move that night or within the next few days. At the same time, he acknowledged that cascading liquidations from the AI related equities selloff remained another possible explanation.

North American and global equities were hit, while the KOSPI and Nikkei sold off heavily. Crypto also declined, supporting the possibility that broad liquidations and risk aversion were spilling into gold.

Columbo said falling yields may have cushioned precious metals from an even steeper decline. If yields had risen during the session, he said gold might already have fallen through $4,000.

“The fact that yields are down may even be providing some cushion to precious metals,” he said.

“Meaning, if yields were up today, we'd be right through $4,000. it's possible that this is actually cushioning the blow.”

Spot gold continued setting new session lows Thursday afternoon. It was last trading at $4034.76 per ounce, down 2.57% for the session.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.