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Gold sees a 56 Tonne Sale in 60 Seconds

At 09:00 this morning gold was rocked by a 56 tonne (1.8 million ounce) gold sale - but it remains a mystery as to who ... and why.

Gold slumped $20 an ounce from $1255 to $1235 before staging a modest recovery (it is currently at $1243). 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.

If the whole trade was an error then the initial $20 fall in gold equates to a cool $36m loss for the 'muppet' that initiated the trade.

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. 

It does remain possible that this is a trader squaring away a large long position - in which case he would surely have done so when markets are more liquid - in other words after lunch London time when the US market is open ; it could have been a Central Bank, but they are much more inclined to deal via the benchmark at 10:30 am - or it could have been someone opening a short position in which case it had the desired effect in catching the market by surprise... all said and done ... we favour the idea that there is a muppet out there.

Ross Norman

Sharps Pixley, London

ross.norman@sharpspixley.com

26 Jun 2017

About the author

Ross Norman

Ross started his business career with business guru Sir Clive Sinclair of Sinclair Research in Cambridge, before joining Johnson Matthey as Gold Refining Manager (then the worlds largest gold refiners), then as a gold trader at NM Rothschild & Sons (the Chairman of the London Gold Fixing) and later Credit Suisse, where he was a Senior Dealer in physical bullion trading.

Ross has an enviable record within the London Bullion Market in forecasting the gold price over the last decade and is frequently sought by the media for commentary on the bullion markets. Ross has made frequent appearances on TV (BBC, CNBC, CBC) in newspapers (FT. Wall Street Journal) as well as in the newswires (Reuters, Bloomberg and Dow Jones).

e: ross.norman@sharpspixley.com

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