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Gold Drops as "Fat Finger" Rumors Circulate

Release Date: 
Wednesday, November 28, 2012

Gold traded more than $30 lower today in part on positive economic news in the U.S., but trading anomalies suggest other non-fundamental factors could be at play in the price drop. The price of gold was $32.60 lower at 7:03 a.m. Pacific Time on the New York Spot Market, trading at $1,710.20 per ounce. Spot silver was $0.93 lower at $33.22 per ounce. (Click here for the most current spot prices.)

The Wall Street Journal reported online that “a flurry of sell orders wiped $20 from the price of gold in the opening minute of Comex floor trading, sending December futures toward $1,710 per troy ounce. More than 13,000 contracts changed hands during that first minute.” The odd price move is reportedly generating rumors of ‘fat fingers,’ or errors made in trading orders.

Chintan Karnani, chief analyst at Insignia Consultants in New Delhi, sees support for gold and anticipates opportunistic buying. “Central bank buying and fear of more central bank buying at lower prices is preventing gold prices from a big fall,” he said. “Laggard short-term investors who were not able to invest in gold at $1,700 are now waiting for a dip in gold prices to invest. All these fundamental factors have kept gold prices firm.”

U.S. Senate Majority Leader Harry Reid expressed disappointment on Tuesday over slow progress in negotiations to avoid the fiscal cliff, the $600 billion in tax increases and spending cuts that are scheduled to commence in January unless Congress enacts legislation to prevent it. "The main underlying factor supporting gold is the fiscal cliff. We're heading into a period of uncertainty over how this matter will be solved, and until it is resolved the fiscal cliff will be supportive," Citi analyst Jon Bergtheil said.

(Sources: “PRECIOUS-Gold falls with wider markets, fiscal cliff caps losses,” Reuters, November 28 2012; “Gold Futures Drop Sharply at the Open,” Wall Street Journal, November 28, 2012; “Gold Heads for Biggest Loss in Three Weeks on U.S. Economic Data,” Bloomberg, November 28, 2012; “Gold falls as market weighs Greek deal, U.S. data,” Marketwatch, November 27, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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