Gold prices plunged more than 4 percent to five-year lows on Monday as a sudden bout of selling across Shanghai and New York markets during the illiquid early Asian trading hours triggered a mini flash crash, deepening bullion's biggest rout in years.
A wave of sell orders in a one-minute period shortly after the Shanghai Gold Exchange opened on Monday sent the most-active US gold futures contract down $48 to as low as $1,080 per ounce, its weakest since February 2010. Within two minutes, an estimated 33 tonnes of gold in Shanghai and New York worth $1.3 billion changed hands. A lack of liquidity, with Japanese markets closed for a holiday, hastened the slide. The ferocious selling triggered CME circuit breakers twice within one minute just before 9:30 p.m. EDT (0130 GMT) on Sunday.
The exact cause of the selling was not immediately known, but traders and analysts attributed the massive move to high-frequency trading algorithms as well as stop-loss selling. "It was just a bit of a bear raid and there was nobody on the other side to mop up the selling," Societe Generale analyst Robin Bhar said. Spot gold prices were 2.8 percent lower at $1,102.05 an ounce by 3:54 p.m. EDT (1954 GMT), down for the sixth straight session, after falling as far as $1,088.05 an ounce, the lowest since March 2010. The US August gold futures contract settled down 2.2 percent at $1,106.80 an ounce. Spot platinum fell for the fifth straight session, paring losses after dropping 5 percent to a fresh 6-1/2-year low of $942.49 an ounce, due to oversupply, sluggish demand and weaker gold prices, which encouraged speculative selling. Palladium dropped as much as 3.4 percent to its lowest since October 2012 at $593 an ounce, before cutting some losses to trade down 1.3 percent at $606. Spot silver was down 0.7 percent at $14.76 an ounce.