Step back from trading gold in short-term: Richard Ross

Richard Ross, Global Technical Analyst at Auerbach Grayson feels that investors are still dusting themselves up from the critical breakdown of gold. He is not sure where the yellow metal will go from here, but he is confident it will attract some bottom-fishers. "People who think that decline represent a buying opportunity, will be attracted," he said.

However, in the short-term, he believes that one should step back and stay away from trading gold. Below is the verbatim transcript of his interview to CNBC-TV18 Q: What is going on with gold, what do you make of the price action we have seen on Friday and yesterday and the minor, meager recovery that we are seeing today? A: Even as a technician, I have seen all. When one sees outsized moves like this there is not a lot to say. A two-day decline of almost 14 percent in gold and as you mentioned, we are getting some of that back today. However, the investors are still dusting themselves up and recatching their breath after really a breathtaking pause from gold here. That was a critical breakdown. We all knew that well defined sideways trading range with about USD 1,540 per ounce on the low and once we broke below that 2 days ago, all bets were off and now we are just trying to recover. I am not sure where we will go from here, but I am sure one is going to attract some bottom-fishers. Some people that think that decline represent a buying opportunity. However, in the short-term, one has to take a step back and let the dust settle here in gold. Q: What is it that caused this big breakdown in gold? I know there is talk of exchange traded fund (ETF) selling, there is talk of paper market getting ahead of the physical market, technicals breaking down. Give me your reason for why you think gold is sold off the way it has? A: It is a combination of these factors, but I think we might never know the real reason. In fact, we look back at some of the big moves in history, whether it is the crash of 1987 here in the US or even the great crash of bank in 1929. Historians are still trying to debate why these big market moves occur. In many ways, I look at them as sort of a rogue wave of a risk aversion. Time and again, these rogue waves occur in nature and we see that in markets as well they take on a life of their own. We break through the technical level then we have a fundamental catalyst then rumour and then we have a liquidity-fuelled selling, which composite of more than two factors that drives outsize. It is kind of one in a million price moves like these.