Latest Gold ‘Flash Crash’ Leads To Questions Regarding Manipulation

Today’s AM fix was USD 1,237.50, EUR 907.92 and GBP 754.44 per ounce.
Yesterday’s AM fix was USD 1,238.00, EUR 909.56 and GBP 756.54 per ounce.

Gold climbed $2.40 or 0.19% yesterday, closing at $1,238.80/oz. Silver rose $0.01 or 0.05% closing at $20.17/oz. Platinum climbed $4.26, or 0.3%, to $1,413.00/oz and palladium rose $9.50 or 1.3%, to $734.25/oz.


Gold in U.S. Dollars, 3 Day – (Bloomberg)

Gold has continued to recover from yesterday’s latest peculiar ‘flash crash’ when gold futures plunged more than $30 at 15:14 a.m. GMT on Monday, before regaining nearly all of that drop within the same minute. Gold remains just under a three week high in London and appears to be consolidating after the 2.9% gains year to date.

Gold futures sharp $30 drop or 2.5% in seconds, from $1,247 to below $1,215, on 4,200 contracts triggered yet another trading halt – this time of ten seconds. The trade occurred fourteen minutes after economic data was released on U.S. factory orders and ISM services index data.     


Gold in U.S. Dollars,  30 Days – (Bloomberg)

The flash crash had the hallmarks of price manipulation.  It is nearly impossible to tell and the sell off could have been a fat finger trade or a large fund or bank liquidating a gold position.

However, given the degree of market manipulation that banks have been found guilty of in recent months (Libor, foreign exchange etc), manipulation is a real possibility. In order to protect investors and the integrity of markets, regulators internationally should again investigate the gold futures market where such manipulation appears to be taking place nearly on a weekly basis now.

This week’s key drivers of the gold market may be the U.S. FOMC minutes released on Wednesday and the December jobs data out on Friday.

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Mark O'Byrne

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