A flash crash in gold prices sent ripples through the commodities market late last month. Bloomberg reported that a sudden surge in trading activity caused gold futures to fall as much as 1.6 percent to $1,236.50 an ounce.
According to industry consensus, the drop was caused by an erroneous trading order that temporarily caused supply to outpace demand. On the morning of June 26, 18,149 lots of a gold futures contract (equivalent to about 1.8 million ounces of gold) were traded on Comex in the span of a minute. When combined with seasonally low trading volume in countries like Singapore and Malaysia, the market was unable to absorb such a large amount of gold, driving down the price.
Fortunately, the sudden plunge in gold prices is not indicative of a trend. In fact, gold has already recovered. Financial pundits are referring to the trade that kick-started the crash as a “fat-finger” error, which occurs when a trader accidentally submits a larger than intended order. If you want to be alerted to these kinds of price swings as they happen, don’t forget that you can use our Precious Metals Prices app to receive alerts via email or push notifications on your phone.