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‘Liquidation binge’ briefly halts gold trading Friday

Shortly after the opening of trade on the Comex market in New York on Friday the gold price plunged more than $30 an ounce to an almost three-month low of $1,259.60 an ounce.

MarketWatchreports a spokesperson for Chicago’s CME Group, which operates Comex, said at around 8:42am Eastern time a 10-second stoppage occurred:

“Scott Carter, CEO at precious metals retailer Lear Capital, said the halt happened after a two-million ounce trade, but it wasn’t clear who was behind the trade.”

CME commentedthis way on the price action on Friday:

The market was caught on a week ending liquidation binge today that was clearly exaggerated by technical stop loss selling, a decline in safe haven interest and perhaps even because of periodic strength in the Dollar.

With a temporary mechanical halt in gold trading today, because of volatility safety type devices, the downside action in gold created enough headlines to at least partially signal capitulation by the bull camp.

However, it is also possible that some funds and or larger spec positions were simply forced to race for the exits today as the market fell through a series of key chart support levels.

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This is what Friday trading (UTC-time) in gold looked like:

'Liquidation binge' briefly halts gold trading Friday

The paper gold market has grown exponentially in recent years and is one of the most leveraged financial markets.

According to one study by the London Bullion Market Association, total trading volume in 2011 amounted to 50 billion ounces.

That equates to 600 times annual global gold mine output and many times the total number of tonnes of the precious metal ever mined.

This chart shows just how liquid the gold market has become with $240 billion in trading volumes each day, more than some major currency pairs and the S&P 500 and the Dow Jones.

'Liquidation binge' briefly halts gold trading Friday

Year to date the gold price has retreated more than 23% and looks set to end its more than a decade long bull run in 2013.