Saturday, October 12, 2013

Gold: Stop Logic (Literally)

Excellent commentary from Stacy Herbert:

Stacy Summary: LOL, I always find these events amusing. I suppose, tactically, it works short term. People screech in fear; but it just makes me laugh. The only way to get rid of gold is to put it all on a missile heading straight into the sun. They’ll have to do that if they want to spare the dollar. Anyway, this keeps happening on Fridays, so keeping up with the psychological warfare of causing panic into the weekend, reverse psychology. Clever. In any other market, however, analysts would ask who would intentionally put on a trade in such a manner as to guarantee losses. Not with gold. They never ask. Keep an eye out for such interesting facts as this.

Massive Sell Order Takes Out Gold Bidstack, Sends Metal To Three Month Lows

In what world is it rational to decide that dumping 800,000 ounces of notional gold into the London Fix (or COMEX open) makes sense? In the space of 4 minutes, almost 2 million ounces notional were flushed into the gold futures markets dumping the price of gold to 3-month lows.

Screeeeeeech!! Shrieeeeeek!!

Meanwhile, China imported over 1000 tons of gold in the first 8 months of 2013. And GLD shed over 400 tons. Not since World War 2 have we seen this sort of movement of gold reserves from one region to another; and every time it has happened in the past, he who got the gold gained the power. Perhaps this will be the one time in the past 5000 years that it happens that he who got rid of their gold gained power, but I doubt it.

Why Gold Slumped So Much This Morning

As the chart above shows, gold’s steep tumble on Friday was similar to the big drop that took place around the same time the morning of Oct. 1.

It’s unclear why this drop took place, but Andrew Wilkinson, chief economic strategist at Miller Tabak, speculated about a few theories that could have taken place.

“I’m wondering if the selling is related to the same name selling [or] liquidating as was rumored at the time,” Mr. Wilkinson told MoneyBeat, “or whether this is some clever prop trader who knows what kind of volume is sufficient to shift the market meaningfully, or far enough, in order to allow covering orders to buy back at a profit.”

Gold’s plunge blamed on one massive sell order

“It appears to have been an order to sell 5,000 gold futures contracts at market,” Eric Hunsader of Nanex told, when asked to explain the swift move at 8:42 a.m. EDT. “About 2,700 went off and tripped the stop logic, halting gold futures for 10 seconds while liquidity replenished. When enough liquidity returned (after 10 seconds), the balance of about 2,300 completed.”