The gold price started the week on the back foot with an unnerving early fall following a massive sell order that sent the metal to its lowest since mid-May.
Gold futures in New York for delivery in August, the most active contract, dropped to a low of $1,236.50, down 1.5% or $20 an ounce in European trade, a six-week low.
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.
The gold price had recovered much of the lost ground in afternoon trade in New York, exchanging hands for $1,243.60 an ounce.
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 bln in gold sales in less than a minute and during a period of illiquidity … and it ONLY moved the needle 1% lower.