FLASHBACK: Gold price fat finger – 56 tonnes gone in 60 seconds

Close-up of keyboard of Computer Assisted Trading System (CATS) developed by the TSX which went live in 1977. Image: TSX

Shares in Jardine Matheson Holdings, a 186-year old firm listed in Singapore, plummeted 83% on Thursday, wiping more than $40 billion off the market value of the storied conglomerate.

The stock quickly recovered and traders immediately pointed to the most likely reason for the strange dealings – a fat finger.

Fat finger trades are human errors – more often than not pressing the wrong buttons SGX later on Thursday said fat fingers or a technical glitch were not to blame and that the trades were orderly (albeit baffling).

In June 2017, the Comex gold market in New York also fell victim to a fat finger that saw a trade executed at some 100 times usual size resulting in a 1.6% drop in the price (the metal also recovered later in the day).

This was MINING.com’s report at the time:

The gold market absorbed a massive $2.2B in gold sales in less than a minute and during a period of illiquidity

Muppet drops gold price to 6-week low

Source: CME Group

Ross Norman, CEO of gold trader Sharps Pixley, ascribes the sharp decline to a 60 second 56 tonne (1.8m ounces) trade executed at 9am in London:

“This bears the hallmarks of a fat finger ‘muppet’ – a trade of 18,149 ounces would be a very typical trade, but a trade of 18,149 lots of a futures contract (which is 100 times bigger) would not be… it leaves us wondering if a junior had got confused between “ounces” and “lots”… or maybe an incorrectly programmed algo ahead of options expiry on COMEX … we just don’t know.”

Norman points out that if the trade, which may also have been carried out by a central bank or a large-scale speculator opening a short position, was indeed an error, the gold price bear who made the move is nursing a $36 million loss at this point:

“The big take-away though from all this is that the gold market absorbed a massive $2.2 billion in gold sales in less than a minute and during a period of illiquidity … and it ONLY moved the needle 1% lower.”

On Thursday gold was trading at $1,279 an ounce in New York, down $4.30 on an uneventful day with 218,101 lots traded by mid-afternoon.

FLASHBACK: Year to the day of $200 shocker, another strange gold price plunge

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