Gold’s 5-Sigma Crash: Inside the Largest Single-Day Drop Since 2013

We just witnessed history:

Yesterday, gold prices fell -5.7%, marking the largest 1-day drop since April 2013.

This is a ~4.5 sigma move.

In other words, such a large move only happens in 1 out of 240,000 days in a "normal" world.

What does it mean? Let us explain.

Statistically speaking, gold's move was a near 5-sigma event.

However, in reality, gold has seen a move of this magnitude only 34 times since 1971.

In other words, this occurs in 34 of 13,088 trading days or 0.26% of the time, per @BurggrabenH.

This is EXTREMELY rare.

Silver prices were hit even harder.

Silver fell as much as -9% in a single-day and posted its largest daily decline since the 2020 crash.

Gold and silver neared -$3 trillion in lost market cap in just over 24 hours of trade.

But, we cannot ignore what happened BEFORE this.

Before yesterday's crash, gold and silver posted their best rally in over 40 years.

Silver was up as much as +85% YTD and Gold was nearing +70% YTD returns.

Still, Silver and Gold are up +67% and +55% respectively, more than 4 TIMES the S&P 500's return.

A drop was overdue.

Flows were a CLEAR leading indicator that this drop was coming.

In the week ending October 10th, gold and silver funds posted +$8.2 billion in net inflows, the 2nd-largest inflow on record.

This followed a record +$9.5 billion seen in the prior week.

The trade was crowded.

Meanwhile, gold was up for 9-STRAIGHT weeks for the 5th time in history.

Gold has never posted 10-straight weekly gains.

In the previous 4 times this happened, gold ended an average of -13% lower 2 months later.

So, what's next after the first blow to a historic run?

In our view, gold remains fundamentally strong.

In fact, it has only improved over the last few days.

Amid the government data blackout, alternative metrics show US inflation at 2.6%.

This marks the 5th-consecutive monthly increase in these alternative metrics.

Meanwhile, institutional capital is still piling into the commodity.

~25% of investors surveyed by Goldman say their favorite trade is “long gold,” the highest reading for the 2nd consecutive month.

This is HIGHER than “long AI” stocks, which stands at ~18% of respondents.

On top of this, central banks are stocking up on gold while disregarding technicals.

On October 13th, gold posted its highest monthly RSI reading in HISTORY, at 91.8.

Physical gold demand this year has proven that buyers are ignoring technicals.

We don't see this changing.

All of this is happening as the US simply keeps on printing money.

By as soon as Friday, total US debt is set to cross above $38 TRILLION for the first time in history.

This marks a +$400 BILLION jump this month, or +$25 billion per day.

Gold knows exactly what this means.

Gold's price drivers are having widespread implications on markets.

The macroeconomy is shifting and stocks, commodities, bonds, and crypto are investable.

Lastly, global M2 money supply is about to hit $140 trillion for the first time in history.

In just 6 months, global M2 money supply has surged +$8 TRILLION.

Investors are losing confidence in fiat.