“The CME Group Inc.’s Comex division recorded an unusually large transaction of 7,500 gold futures during one minute of trading at 8:31 a.m. EDT,” Wall Street Journal’s Tatyana Shumsky penned in an Apr. 30 article, titled, Gold market shakes off $1.24 billion ‘fat finger’. “The sale took out blocks of bids as large as 84 contracts in one fell swoop and cut prices down to $1,648.80 a troy ounce. The overall transaction was worth more than $1.24 billion.”
Shumsky then writes that there is speculation among traders of a ‘fat finger’ in the market place that day—maybe a mistake, she reckons, maybe an “input error.”
Instead of calling up Bill Murphy or Chris Powell at Gold Anti-Trust Action Committee (GATA) for their take on such a peculiar trade, the gumshoe hound reported comments made by Citi traders, instead.
A ‘fat finger’, “or a Gold Finger as it might be known in the bullion market,” she quoted Citi traders in their note to clients regarding the incident.
To her credit, however, the determination of Shumsky to get to the bottom of this mystery didn’t lead her to solicit a comment from JP Morgan’s Blythe Masters. There, Masters most likely would have replied that she was shocked, shocked at such shenanigans would ever take place at the CME establishment.
“One indicator that the transaction was a mistake was its size,” Shumsky brilliantly surmised. “At 750,000 troy ounces, such large trades are rarely conducted amid very thin trading volumes. Monday trading was expected to be quiet as market participants in China and Japan are out on holiday and many European traders are preparing for a holidays there.”
Like a city beat reporter who daringly suggests that men showing up at a bank on a holiday to make a deposit through the back door at 3 a.m. was apparently fishy, Shumsky captured the event eloquently so that the reader could make up his own mind of the event.
“No one who has the account size and the money to trade thousands of gold contracts would do it in one transaction, that’s just stupid,” WSJ’s Barney Fife quoted a trader. “The collateral required to purchase 7,500 contracts is about $75.9 million in cash that the trader would have deposited with his broker.”
In her dogged determination to collect varying opinions of what happened, Shumsky met up with a seasoned Wall Street pro, where she then finds the plot thickening.
“Still, not everyone agreed Monday’s slip in gold was caused by a keystroke error,” she stated. “Chuck Retzky, director of futures sales for Mizuho Securities USA, said that silver prices suffered a similar leg down at the same time as gold, tumbling 35 cents to $30.805 a troy ounce, but other markets like Treasurys, currencies and stocks were unperturbed.”
Now that uncovered anomaly is something Jack Anderson would have offered effusive kudos to the meticulous WSJ reporter—a budding Junior Mogambo Ranger, of whom most certainly Richard Daughty would be proud.
Related: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), ProShares Ultra Silver ETF (NYSEARCA:AGQ), iShares Gold Trust (NYSEARCA:IAU), ETFS Gold Trust (NYSEARCA:SGOL).
BeaconEquity.com is committed to producing the highest-quality insight and analysis of small-cap stocks, emerging technology stocks, hot penny stocks and helping investors make informed decisions. Our focus is primarily OTC stocks in the stock market today, which have traditionally been shunned by Wall Street. We have particular expertise with renewable energy stocks, biotech stocks, oil stocks, green energy stocks and internet stocks. There are many hot penny stock opportunities present in the OTC market everyday and we seek to exploit these hot stock gains for our members before the average daytrader is aware of them.