In case you were sleeping last Friday gold prices took a sudden dive. Morning trading was cruising sideways in a typical sleepy Friday pattern, staying within a 4-point range on low volume. In other words, nothing happening here folks, move along. Then came just before the stroke of 11 A.M. Eastern time.
Your friendly Gold Enthusiast was looking through some trade possibilities, not really finding anything interesting. The live chart for GLD he keeps in the lower left corner of his screen suddenly started dropping down, first below 1284 then quickly through 1280. Clearly something was happening, but what? Checking CNBC and CNN showed no news – Trump hadn’t punched up anything stupid on Twitter, no news from the ECB, North Korea feeds were relatively quiet – so it must be a big trade. Sure enough, it was.
The Monday morning news reported that 40,000 contracts were traded in a 10 minute period, each worth 100 oz of gold. This dropped gold prices 1.1%, down to 1274. Over the next few hours, another 23,000 contracts were traded, mostly on the sell side, dropping gold briefly to 1273, but most fluctuated closely around 1274. This looked like standard trading action, not all coming at once, drips at a fast rate but no more huge dumps. As the price held, it seems some bulls stepped in to buy on the dip.
What can we make of this sudden drop?