Gold reverses dramatically and drops $40

• An improvement in risk sentiment pushed gold sharply lower. 
• Volatility remains elevated across financial markets, Wall Street trims losses. 

XAU/USD rose earlier today to test mutli-year highs at $1689 but it failed to break higher and the rally lost some strength. Recently it spiked to the downside falling more than $40 in a few minutes. It bottomed at $1642. 

As of writing it trades at $1667, marginally lower for the day. The move lower took place amid a recovery of the greenback against majors and as equity prices in Wall Street rebounded, trimming losses. Volatility across financial markets remains elevated with sharp bounces. 

The Dow Jones is down now just 2.12% and the Nadaq 2.41%. Crude oil collapses almost 9%. Emerging market assets are under pressure. 

Technical levels 

A consolidation below $1660 would suggest an extension of the bearish correction, with next support levels seen at $1648 and $1635. On the upside, the critical level continues to be the area around $1690, the multi-year high. Above the mentioned level, gold should test $1700.