Gold: Why gold was sold off so massively?

Gold

Conventional wisdom cannot explain why gold was sold off so massively on Friday. The explanation seems to have been more behind a capitulation of selling across assets as portfolios were struck by margin calls. Gold closed -3.5% lower on Friday (-$57) in a move that effectively rebounded off the 50% Fibonacci retracement (of $1445/$1688) at $1567. We have been advocates of buying gold into weakness and whilst this corrective move has gone beyond our expectation of an unwind from the February rally, we now see this move as being a real buying opportunity. The positive reaction today on gold is encouraging for support levels and close back above $1591 (old breakout) and the 38.2% Fib (at $1595) would be an encouraging sign. Momentum indicators have been unwinding from their bullish positioning are still with the unwind, but RSI is around 50 so the bulls at least have renewed upside potential to factor now. The hourly chart is beginning to show more positive indication this morning, but the bulls need to build on this move and hold the initial support $1579/$1590. Furthermore, the hourly RSI needs to move into the 60s to suggest recovery momentum is more than a bull trap this morning. Closing back above $1611 would suggest the bulls back on track.