Lurching gold prices mystify traders -- and Reuters

As usual the news agency questions nearly everyone except the biggest participants in the gold market, central banks.

* * *

Lurching Gold Prices Mystify Traders, Undermine Confidence

By Frank Tang
Reuters
Friday, October 18, 2013

NEW YORK -- In the early hours of the New York morning on Thursday, when scarcely a few hundred lots of gold futures are usually traded, a wave of buy orders worth over $2.3 billion surged into the market.

Prices soared 3 percent in just 10 minutes, setting the tone for the next 12 hours of trade -- and puzzling many traders and investors who have been rattled by a series of similarly abrupt, and largely unexplained, trade surges over the past two weeks. ...

A few suggested darker causes: the deliberate gaming of the market, whether by a rogue trader or a computer-driven algorithm that seeks to maximize market impact by overwhelming the system with a large number of orders in milliseconds.

Whatever the cause, the trades risk undermining confidence at a time when electronic trading glitches and flash crashes have roiled other U.S. financial markets in recent years and will fuel concerns that algorithmic trading systems have undue influence over prices.

"Clearly, whoever is out to sell is looking for high impact. It's somebody who is either running a big short position or would like to see a lower gold price for other reasons," said Ross Norman, Chief Executive Officer of London-based bullion broker Sharps Pixley, referring to an abrupt $30 drop on Oct 11.

For the complete story:

http://www.reuters.com/article/2013/10/18/us-gold-tumble-analysis-idUSBR...