Large Gold Sell Order Trips Circuit Breaker, Causes 20 Second Shut Down

Andrew Klips  |

Real-time data service company Nanex said that at 2:54:05 AM EDT Thursday, a huge sell order of gold futures contracts tripped a circuit breaker and shut down of trading on Globex that lasted for 20 seconds  Owned by exchange operator CME Group (CME) , Globex is touted as the fastest global electronic trading system for futures and options.

The future price sunk to a four-week low, falling from about $1,350 to $1,344.50 in about a minute, triggering the halt.

Trading halts occur to prevent excessive price volatility, generally only last a few seconds and aren’t really that uncommon, although one of this length and being a large gold contract sale is what puts it in the news. The CME Stop Logic circuit breaker is reportedly designed to stop trading for between 5 and 20 seconds.

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“This is the longest halt we have recorded in a widely traded futures contract,” according to the Nanex website. Nanex created NxCore, the technology behind the delivery of a streaming whole market data feed from Telvent DTN. The company says a close look at the data shows that the halt was likely “from one large order to sell at the market.”

Gold rallied in July and August, catching some wind at its back because of oversold conditions and concerns over the Federal Reserve’s plans for its monetary stimulus package.  More recently, tensions in the Middle East and what was believed to be an imminent strike by the United States on Syria sent investors into the precious yellow metal for its “safe haven” capacity. 

As the world now ponders diplomacy in Syria, some of the safe haven appeal of gold has receded.  Data that could be interpreted as upbeat on new jobless applications have also taken some of the luster off gold in trading on Thursday.

In trading on the Comex division of the New York Mercantile Exchange on Thursday, gold for December delivery, the most actively traded contract, fell for the third straight day, breaking a support level at $1,350.  December gold wrapped the day down $33.20, or 2.4 percent, at $1,330.60 per ounce.  Gold finished August at $1,396.10 an ounce after traveling as high as $1,434 per ounce on August 28, its highest level since May 14, according to information at Barchart.

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