Seeking Alpha

Gold sell-off tied to single trade: Nanex

  • Was one trade responsible for a sudden $25 drop in the price of gold Friday morning?
  • The move lower — which happened in the space of 2 minutes and sent the yellow metal to a three-month low — is being blamed on a market order to sell 5K gold futures contracts, Nanex tells CNBC.
  • "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," Nanex remarked.
  • The move appears to have affected silver, platinum, and even oil.
  • Gold -2.15%, silver -3%, platinum -1.7%, crude -1.6%
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Comments (77)
  • If I had a dollar for every time the gold market was bombed this year.....
    11 Oct 2013, 01:46 PM Reply Like
  • That's good if you're a goldbug, right? You can accumulate more on the cheap. So whats the problem, provided you are able to hold in the long run?
    11 Oct 2013, 05:14 PM Reply Like
  • Even better if you're hedged. Here's how being hedged cushioned the blow for GLD longs last spring ( http://seekingalpha.co... ). If you're hedged and you're still a long term bull, you can always sell your appreciated hedge and use the cash to buy more beaten down GLD (or physical gold, if that's your preference).
    11 Oct 2013, 05:20 PM Reply Like
  • goldbugs are not convinced anymore!

     

    http://seekingalpha.co...
    12 Oct 2013, 09:36 AM Reply Like
  • Must be nice to sell 500,000 oz of gold you don't even have.
    11 Oct 2013, 01:52 PM Reply Like
  • How is it possible that gold (real money all over the world) is losing relative strength to a fiat currency that doesnt have enough printing presses to keep up?
    11 Oct 2013, 03:42 PM Reply Like
  • Russ,
    Is it that what they call doing God's work ?
    11 Oct 2013, 04:50 PM Reply Like
  • because interest rates on all cash worldwide are going through the roof...thus your ability to leverage your gold into something that has actual value is being constricted. Since the truly rigged markets are called "the yen" and "the yuan" and NOT gold i would recommend getting in the real game of finance this go around and not the pseudo scientific game of "the lump."
    11 Oct 2013, 07:50 PM Reply Like
  • Greetings Jjalan,

     

    One plausible explanation could be found in an interview by Russell Roberts on EconTalk with Steve Hanke, the best approximation of a hyperinflation expert that we could find.

     

    There is much more to the October 2012 discussion with Roberts and Hanke and it is recommended that you get the full story at the following link (
    http://bit.ly/RYgvGj)

     

    Regards.
    11 Oct 2013, 09:21 PM Reply Like
  • New Low,
    It's a long time already I don't beleive that inflation tale anymore.
    Look at Greece, Italy, Spain, Portugal, Ireland... What did the creditors do ? Oh, yes, they cut the debts by a certain percentage by injecting some money and by forcing banks to apply a haircut, but in the same time, they cut wages, salaries, pensions... Now that is highly deflationary.
    Look at the US. Despite all the fracking peptalk, the number of people who are out of the workforce is still very high. That too is very deflationary.
    The question however remains whether a deflationary condition should be negative for gold. I'm not sure the answer should be affirmative since deflation always enhances the monetary and economic tensions between nations.
    12 Oct 2013, 02:43 AM Reply Like
  • Greetings Filipo,

     

    If you get a chance to listen to the interview, inflation is not proposed in answer to the question "How is it possible that gold (real money all over the world) is losing relative strength to a fiat currency that doesn't have enough printing presses to keep up?"

     

    Steve Hanke says the following:

     

    "Well, let's just start with Lehman's collapse in September 2008. That's a convenient date. Since that point in time, the Federal Reserve's balance sheet has increased roughly by three and a half times. So that means they are buying a lot of these bonds. And that's where they go, on the asset side of the balance sheet.

     

    "Now that means that high-powered money, or what I call state money--the amount of money produced by the state--has more or less tripled. It's exploded. And this has many people concerned; and they get excited and say we are going to have hyperinflation tomorrow. That's a hyperinflation nexus. The Fed's buying all these bonds; their balance sheet is exploding; high powered money is increased very rapidly. And people conclude that it's going to be like Yugoslavia, or the Weimar Republic, or something like that.

     

    "Now, it has meant that state money has increased from about 6.5% of the total money supply, when you measure the money supply properly with a broad measure, like M3--so we went from state money being at about 6.5% at the time Lehman collapsed, until now it's about 15%. So, you've more than doubled the size of state money.

     

    "But the problem is: I said 15%; now state money is 15% of the total amount of the money supply--meaning that state money is peanuts. What really is important is bank money--and bank money is created by the commercial banking system and shadow banking system, and that's what really counts. So, in a way we have had the following scenario develop after Lehman: We've had ultra-loose monetary policy with regard to state money and the Federal Reserve.

     

    "But with the financial regulation, that it was legislated with Dodd-Frank, and also with what is called the Basel capital requirements, and specifically Basel III, which is being imposed on banks--to increase the capital-asset ratios of the banks. These two things--financial regulation and Basel--have in effect imposed ultra-tight monetary policy on the banking system and bank money.

     

    "So, as a result of the two, we've had the total amount of the money supply actually being very anemic, not growing very much at all. And in fact, if you look at a trend line since 2009 and look at the endpoint today of the trend line as you are going left to right, that point is about 7.5% higher than the actual level of the money supply that we have.

     

    "So, you could argue that relative to trend we've got a deficiency of about 7.5% in broad money. And the reason why is that the dominating feature has been the reregulation of banks and the tight monetary policy imposed on bank money. Which accounts for 85% of the total amount of money in the economy."

     

    It is state money in the system versus bank money in the system. one has been expansionary but relatively small while the other has extremely restrictive. This may answer Jjalan's question.

     

    Regards.
    12 Oct 2013, 10:16 AM Reply Like
  • Hyperinflation? I don't think so ...
    13 Oct 2013, 06:35 AM Reply Like
  • Credit growth slowed after the great recession because balance sheets had shrunk. Both the willingness and ability to lend and borrow depend on the borrower's net worth and net worth was much lower.

     

    Tighter financial regulation is pretty recent. Not the primary cause.
    13 Oct 2013, 06:39 AM Reply Like
  • New Low,
    I couldn't agree more.
    It's interesting to see how real disposable M3 evolution affects inflation/deflation.
    Your monetary argument seems to confirm the conviction I had based on basic observation.
    But the question remains whether the deflationary tendencies should be bad for the gold price. In theory they should since all assets get battered by deflation, but gold might be the happy exception. It all depends on how severe this deflation will be and how strongly it will affect monetary tensions.
    I therefore regard the shutdown/debt ceiling discussion outcome as a very important trigger. The GOP probably doesn't realize the international relevance of this and the Democrats probably don't realize what they are aiming at is a fundamental and dramatic change of American society, a change which that society isn't willing to accept.
    13 Oct 2013, 08:33 AM Reply Like
  • AiP,

     

    just a repeat, hyperinflation was never proposed. Only used the commentary of a person was personally involved in stopping 10 of the world's known 57 past hyperinflations.

     

    Regards.
    13 Oct 2013, 10:53 AM Reply Like
  • New Low,
    "It all depends on how severe this deflation will be and how strongly it will affect monetary tensions"
    should be:
    "It all depends on how severe this deflation will be and how strongly it will affect currency tensions"
    13 Oct 2013, 02:22 PM Reply Like
  • the Government has been doing it for years
    13 Oct 2013, 10:11 PM Reply Like
  • and I still hear people talking as if manipulation of gold is a conspiracy theory. I think that view is beginning to change as we realize that the government and bankers are criminal organizations.
    11 Oct 2013, 01:57 PM Reply Like
  • Every market is heavily manipulated now. LIBOR, oil, general stock market, US real estate market, bond market, etc. We don't have real markets anymore really. We have nearly an entirely centrally planned, interventionist economic system with pseudo markets. Thank the Keynesians, big government (both US political parties suck) and the large banks.
    11 Oct 2013, 04:23 PM Reply Like
  • Manipulation of gold prices is a conspiracy theory.

     

    The only ones believing in the conspiracy theory are small retail investors who are trying to rationalize their financial disappointment.
    13 Oct 2013, 06:40 AM Reply Like
  • Jason,

     

    Manipulation theories are for people who are not sophisticated enough to understand economics and finance.
    13 Oct 2013, 06:41 AM Reply Like
  • Funny how certain conspiracy theories have become conspiracy fact.
    A voice from the past has a thought for you, AiP;
    "It ain't what you don't know that gets you into trouble.
    It's what you know for sure that just ain't so."
    Mark Twain
    13 Oct 2013, 10:59 PM Reply Like
  • I dont think anyone is taking a prop bet with 650MM. I would think this is a natural seller just like the macro guy that knocked it down last week.
    11 Oct 2013, 02:00 PM Reply Like
  • chump change. Jeff Bezos bought the Washington Post for almost that same amount. From his PERSONAL fortune.
    11 Oct 2013, 07:52 PM Reply Like
  • The seller got scared that a budget agreement was imminent Friday and liquidated the position.

     

    As it turned out, gold should be up Monday if it is truly a refuge from crisis.
    13 Oct 2013, 06:44 AM Reply Like
  • That's 17 tons moved in one order.
    11 Oct 2013, 02:07 PM Reply Like
  • My bet is gold at $1100 before January.
    11 Oct 2013, 02:09 PM Reply Like
  • - And you base this prediction on what information or insight ?
    11 Oct 2013, 02:53 PM Reply Like
  • just as valid as any predictions that says gold is going higher.
    11 Oct 2013, 04:45 PM Reply Like
  • The market is so rigged that I isolate myself from the up and down of the spot price. I focus solely on keeping 25% of my portfolio in gold.

     

    If gold is at $1100, I think I would have to buy maybe 2 or 3 more roll of Krugerrands.
    12 Oct 2013, 12:08 AM Reply Like
  • i would base it on higher rates for cash money thus causing an expansion of credit in some areas while a constriction of credit in others. in other words "expand in the areas of consumption and constrict in areas of commoditization."
    12 Oct 2013, 12:28 AM Reply Like
  • I predict earth will be hit by an asteroid and all gold stocks will be replenished. Sell gold, buy a deep bunker.
    12 Oct 2013, 08:55 AM Reply Like
  • And how liquid are Kruggerands?
    13 Oct 2013, 06:45 AM Reply Like
  • I'm the poorest in my neighborhood. However, my neighbors are mostly millionaires and I'm well like. Luckily, liquidity is not an issue for me.
    14 Oct 2013, 03:52 PM Reply Like
  • It would be useful to have disclosure on who sells large blocks of paper gold futures (or in general, large blocks of futures contracts that move/corner markets).
    11 Oct 2013, 02:18 PM Reply Like
  • White,
    Exactly, but they'll never disclose that information. It would drive prices higher.
    11 Oct 2013, 02:24 PM Reply Like
  • It's the perfect timing for them to do this kind of dumping because no COT report will be released. They'll hide position move perfectly.

     

    Nobody liquidates like this. Only MSM talking heads will say it's liquidation. It's obvious to trigger stop orders to cover shorts.
    11 Oct 2013, 02:29 PM Reply Like
  • I am glad you are not a regulator.
    13 Oct 2013, 06:46 AM Reply Like
  • You got that right!!
    And then you would find out that the people who are dumping big blocks to move the market down and take out all the stops are the same people buying it back in little bits
    Manipulation to the fullest
    13 Oct 2013, 08:57 AM Reply Like
  • Probably Bernanke (OZ) selling futures out of USA and coordianted with other Central banks
    11 Oct 2013, 02:24 PM Reply Like
  • Goldman, MS downgrade gold, next day big drop to push it down.. hmm.. free market capitalism... nobody will go to jail?
    11 Oct 2013, 02:24 PM Reply Like
  • Hey, you want to be an investor. Get used to the volatility.
    13 Oct 2013, 06:46 AM Reply Like
  • This is one more example of Pinnochio's nose getting longer and longer as he tries to sell stuff he doesn't own. As I believe in Santa Clause and the tooth fairy and god, I'm bound to believe that these trades are backed by gold!
    11 Oct 2013, 02:24 PM Reply Like
  • exactly. SELL GOLD. the real product is called "profits" and "the means of production." who knows...at some point we might even have an economic recovery too...
    11 Oct 2013, 07:54 PM Reply Like
  • in other words "the vast majority of people who claim to own gold don't have any." this acts as an "overhang" on actual price. confirmation of this can be observed in the mining space. if "real gold" were so valuable then how come the mining stocks haven't been soaring since 2008? and the answer "well, they didn't start moving higher until the price of real gold collapsed in 2013" (and appears to continue to) speaks volumes (inferentially) to me.
    12 Oct 2013, 12:31 AM Reply Like
  • Val,
    I suspect some miners to be in a hedging position that is way higher than the amount of their proven gold deposits. Now, that is a recipe for LT corporate disaster.
    12 Oct 2013, 02:51 AM Reply Like
  • Val Halla, what about the mining stocks as you mentioned. I'm 1700 shares into GOLD , Rangold Resources. The money is in a SEP IRA, I cost averaged as far as I could until I ran out of cash. Averaged out to about $93 per share, it's currently somewhere in the $68 range. I should point out that I was playing with house money for awhile and was able to accumulate about $65k just riding the waves. Now that profit has been wiped out. I still believe once inflation kicks in which I also believe is inevitable, the price will skyrocket. Either that or China will go onto a gold standard to back its currency and again the price will skyrocket. I'll take any and all opinions on holding or bailing before I lose principal.
    12 Oct 2013, 06:43 AM Reply Like
  • The exchange knows who sold them, but shouldn't have to divulge who the seller is. Block trades happen all the time in CME products without everyone knowing who the parties were. I think the important thing to take away here is that the gold chart has several breaks in it from large individual sellers who were completely price indiscriminant.
    11 Oct 2013, 02:33 PM Reply Like
  • I told you, Bernanke (OZ) sold them
    11 Oct 2013, 02:45 PM Reply Like
  • Business as usual for the goodafellas!
    11 Oct 2013, 02:53 PM Reply Like
  • The massive LIBOR manipulation was NEVER a manipulation till it finally came out in the open for everyone to see. So anyone who suggests that banks are incapable of market manipulation has no legs to stand on.
    11 Oct 2013, 02:56 PM Reply Like
  • Thats a completely different market. Libor fixing is completely controlled by the big banks. The gold market is not controlled by anyone other than supply and demand IMO.
    11 Oct 2013, 03:04 PM Reply Like
  • Yorkville, you need to watch some videos about Ron Paul questioning Greenspan. Greenspan admitted central banks manipulate the gold price with gold leases and swaps during a Congressional hearing. Central banks consider gold in the vault and gold receivables (leases and swaps) as one line item.
    11 Oct 2013, 04:25 PM Reply Like
  • Then why did Bernanke say the opposite just recently when he said no one understands the price of gold? I'll give you that in some markets there may have been some short term technicals like you are mentioning that could have affected pricing, but long term it will always be supply versus demand.
    13 Oct 2013, 09:21 AM Reply Like
  • It was me. Sorry guys.
    11 Oct 2013, 02:59 PM Reply Like
  • Ask GS. They might know. Germany wants its gold back; that's a lot of gold to get your hands on you never had
    11 Oct 2013, 02:59 PM Reply Like
  • june,
    I wonder if the US will give Germany their gold back in the shape of heaps of paper gold, contracts.
    11 Oct 2013, 04:57 PM Reply Like
  • A government somewhere is very afraid of gold showing its real price.
    The CFTC can't do anything about it when an agent does this for the powers that be. This is just like the Seeking Alpha story of NY Fed being sued for allegedly firing examiner over Goldman claims. There are no fair markets anymore.
    11 Oct 2013, 03:04 PM Reply Like
  • In a few years when the interest on the national debt is impossible, we will consider these prices for physical gold as very cheap. Regardless of any manipulations of the fiat gold.
    11 Oct 2013, 03:33 PM Reply Like
  • oak,
    I wonder how much of US national debt goes to maintaining the gold price subdued. It might be quite a large sum already.
    They want to shake out the weak hands, but it costs them dearly. Every oz they sell on paper contract that is physically bought by the Chinese or by the public, should be bought back later at a higher price, unless they make the sums needed to go short higher and higher and higher and higher... until the debt ceiling is at .... XXXXT ?
    11 Oct 2013, 05:04 PM Reply Like
  • if paying off the debt was the priority then prices should be soaring. instead...they are falling. I do agree there is an interest rate back up in cash markets. that's a GOOD thing. that's called "1.5% interest on your savings account" instead of the current .0000000000000001%.
    11 Oct 2013, 07:56 PM Reply Like
  • How long can the FED keep this up??? It just keeps on shooting to new lows at random intervals. GS is almost certainly involved.
    11 Oct 2013, 03:42 PM Reply Like
  • I will wait next time before selling such a large lot.
    11 Oct 2013, 03:53 PM Reply Like
  • Just buy the physical and take it out of the system. The physical is selling for below cost of the miners again.
    11 Oct 2013, 04:14 PM Reply Like
  • Is that similar to an equity selling below book value? If so thats a sign distress right ?
    11 Oct 2013, 04:48 PM Reply Like
  • QE is also way over $85 billion/month most months. Eric Sprott wrote a piece on this weeks ago here http://bit.ly/1hIRnA0 and I just interviewed a well known real estate investor who said the Fed and banks are intervening heavily into the real estate markets with much larger QE too. He said QE is around $140 billion/month some months.
    11 Oct 2013, 04:58 PM Reply Like
  • Why do people buy gold if they believe the market is manipulated ? It is not a level playing field . You will go broke playing against the pros .
    11 Oct 2013, 05:21 PM Reply Like
  • Why buy gold? because you want to own gold.
    If you are trading - then it kinda makes little difference whether you trade gold or oil or tech stocks . Its all the same - you make bets, sized appropriately, use stop limits and sometimes ya get lucky. Sometimes ya dont. Try not to lose it all - and keep yer chin up.
    11 Oct 2013, 08:01 PM Reply Like
  • Short it instead then. Its not manipulation downward -- but trapped longs!
    11 Oct 2013, 06:38 PM Reply Like
  • The big players have very deep pockets and very long time horizons. They can drive prices wherever they want. Accumulate physical as panicked "investors" sell. They will drive it as low as necessary to get all the little people to sell . They will buy. Physical.
    Also good hard assets - oil in the ground etc - E&&P companies like the Canadians have been driven down - may ultimately get bought out at a "premium" to the last years price levels.(Hehe ).
    Who knows - price levels will look strange and alien 10 years from now. Just like todays price levels on everything probably looks to people who still think in 1970- dollars. ( Remember 80K for nice houses in Palo Alto?).
    The traders with small capital and anxious about this quarter's "performance" - are the herbivores . They nourish the large predators.
    11 Oct 2013, 07:06 PM Reply Like
  • gold and silver bugs make for tasty treats...
    12 Oct 2013, 01:23 AM Reply Like
  • The really long term dynastic wealth cares about assets. cash, dollars whatever - are not assets - in the long run they have always lost all their value. No no. These folks want to own the best real estate, the gold bars and coins, paintings, oil wells. And as many smart people as they can buy. Oh - and of course they are always in the market for congress critters - that they buy with lunch money.
    Dats da way dey roll.
    11 Oct 2013, 07:13 PM Reply Like
  • If you buy "Tech and Financials " - as one Maria always recommends, they will leave you alone. Thats OK - in fact those trading sardines are specifically designed for YOU. They will "perform", they will provide much amusement - in the long run they wil leave you with nothing. because you dont own anything - real that is. Thats da plan!
    11 Oct 2013, 07:32 PM Reply Like
  • Lot of fancy predictions are made by pundits every second about gold. How many of them really turns accurate.
    12 Oct 2013, 07:14 AM Reply Like
  • Yesterday i had phoned my broker at 8:35 am to sell 500 000 ounces of gold.Trying to save on commission I said do it in one trade. What a mistake since the median price of sale turned out to be $1272 and the sale started at $1287 to wind down at 1266.My broker then told me that had I just spread out the sales during the next few days there is a good chance my median price of sale would have been around $1287.

     

    I thus lost 7.5 million dollars because of this stupid huge sale in one minute (500000 ounces times 15$).

     

    My broker also said that if I had shorted I would have made the 7.5 million dollars since it was real easy to buy back in the 1260 zone after the nuclear selloff. I asked him if that was legal and he said everyone is doing it. Wow I can just do this over and over , that is really really cool.I can also pick times of day when I can see who is buying but they cant see me hahahahaha!
    13 Oct 2013, 09:22 AM Reply Like
  • gold,
    "Yesterday i had phoned my broker at 8:35 am to sell 500 000 ounces of gold."
    Are markets open on Saturday ??
    13 Oct 2013, 02:29 PM Reply Like
  • another manipulative sell order again this am ?
    15 Oct 2013, 09:05 AM Reply Like
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