28 November 2012

Comex Open Saw 24 Tonnes of Paper Gold Dumped at Market - Sharks, with Laser Beams


I am open to more data and other possibilities, but it certainly looks like the infamous Dr. Evil strategy being employed for the Comex post-option expiration in which a large number of call options are turned into active December futures contracts, and then hit hard with a manipulative price effort the next day. I suggested that this might happen given the way in which the option market closed on Tuesday.  Such phenomena are like old friends now in these markets.

Funny too how roughly the same thing happened in the Silver futures about the same time. Silver is also post option expiration today. 

As you know I used to track the big price drops around key option expiration dates on the precious metal charts.

That is not the only possibility. It could also be some 'tape painting' as the big shorts knock the price down before they close the books on their losing positions for the month. But I am inclined to think it was a special post-expiration event.

And it *could have been* just an unfortunate accident that happened in two different and important global markets simultaneously.  Maybe it just 'vaporized.'

Not to worry, I am sure Bart Chilton and the stalwarts at the CFTC, who are closely watching the gold and silver markets, have already identified the seller(s), and examined their selling motivations, and the size and placement of their 'fat finger.' I am sure they will let us know about it, four or five years from now.

"Gold saw a massive 24 tonne sell order (7,800 contracts) at 08:20 a.m. New York time - bang on the opening of the world's largest gold exchange - which [saw] a fall of 2.25% in the market price.

If the selling was year-end profit-taking then it was inept. Dealers try and finesse big sell orders into the market to get the best (highest) price for the biggest volume they can and thereby optimize profit - that requires stealth. If on the other hand it was a "fat finger" episode as has been suggested with a broker said to be looking to roll his December gold futures contract then it was even more inept.

More likely this could be a short play, with the seller looking to trigger stops below the market at $1730 and thus extend the move significantly lower and thus increase his profits. If so, he certainly caught the market on the hop as the move is counter-intuitive with everything else that is going on in the economy.

Rising concerns about whether Democrats and Republicans can find common ground between tax increases and entitlement spend reduction remains to be seen. More importantly, the US reaches its law-enshrined debt ceiling of $16.4 trillion early to mid February 2012. That promises fireworks again as it did in August 2011 when gold hit an all time high of $1922 as the market stares into the abyss of a possible US debt default.

Against the current economic backdrop, a short seller would have to be quite brave. In short, we will not know the identity or the reason for the sale for a while. Longer term gold investors should not however be deterred - the rationale for buying gold is as favorable as ever and a degree of patience required.

Ross Norman, CEO, Sharps Pixley, London, Flash Crash in Gold - Whodunnit?

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