Manipulative Gold ‘Fat Finger’ Or Algo Trade Worth $1.24 Billion
The gold market was briefly shaken by an unusually large early morning sell order, which triggered a brief trading halt in gold futures and left traders questioning whether the transaction was a mistake and the motivation of the seller.
Gold fell $14 in one minute despite no breaking financial and economic news and despite no movement in the dollar, oil, equity or bond markets.
There was only the insignificant personal income and spending numbers – which came in slightly better than expected and could not justify such quick falls.
CME Group Inc's Comex division recorded an unusually large transaction of 7,500 gold futures during just one minute of trading. The sale took out blocks of bids as large as 84 contracts in one fell swoop and cut prices down $15 to $1,648.80 a troy ounce.
The sharp losses triggered a 10-second trading halt in June-delivery gold futures, CME told Dow Jones Newswires Tatyana Shumsky.
"The market was given a short period to recalibrate and ... it was for 10 seconds," a CME spokesman said. "It only happened in gold futures, in the June gold contract."
Gold traders buzzed with speculation that the transaction was an input error - a so-called "fat finger" trade."Or a Gold Finger as it might be known in the bullion market," traders at Citi joked in a note to clients.
The massive size of the transaction - 750,000 troy ounces worth more than $1.24 billion – led to speculation that it was either a mistake by a trader or that an entity wished to manipulate the market lower.