Gold, Precious Metals Flash Crash Following $2.7 Billion Notional Dump

Tyler Durden's picture

The last time gold plummeted by just over $30 per ounce (dragging down silver and bitcoin with it) and resulted in a crash so furious it led to a "Velocity Logic" market halt for 10 seconds, was on January 6, 2014. Many said this was just perfectly normal selling, although we explicitly said (and showed) that it was a clear case of an HFT algo gone wild (following an order to do just that and slam all sell stops) when someone manipulated the market and repriced gold substantially lower.

Precisely one month ago, some 18 months after the incident, the Comex admitted as much, when it blamed the collapse on "unusually large and atypical trading activity by several of the Firm’s customers and caused the mass entry of order messages by Zenfire, which resulted in a disruptive and rapid price movement in the February 2014 Gold Futures market and prompted a Velocity Logic event." Curiously despite the "errant" order, gold did not rebound because the entire purpose of the selling slam was to reset the prevailing price far lower. This is what the Comex said in Disciplinary action 14-9807-BC:

Pursuant to an offer of settlement Mirus Futures LLC (“Mirus” or the “Firm”) presented at a hearing on June 16, 2015, in which Mirus neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“BCC”) found that it had jurisdiction over Mirus pursuant to Exchange Rule 418 and that on January 6, 2014, Mirus failed to adequately monitor the operation of its trading platform (Zenfire), and connectivity of its trading system (Zenfire) with Globex. This failure resulted in unusually large and atypical trading activity by several of the Firm’s customers and caused the mass entry of order messages by Zenfire, which resulted in a disruptive and rapid price movement in the February 2014 Gold Futures market and prompted a Velocity Logic event.


The Panel found that as a result, Mirus violated Rules 432.Q. (Conduct Detrimental to the Exchange) and 432.W.

We bring this up because moments ago, just before 9:30pm Eastern time or right as China opened for trading, gold (as well as platinum, silver, and virtually all precious metals) flashed crashed when "someone" sold $2.7 billion notional in gold, resulting in a 4.2% or about $50 to just over $1,086/oz, the lowest level since March 2010.







Once again, as in February 2014 and on various prior cases, the fact that someone meant to take out the entire bid stack reveals that this was not a normal order and price discovery was the last thing on the seller's mind, but an intentional HFT-induced slam with one purpose: force the sell stops.

So what caused it?

The answer is probably irrelevant: it could be another HFT-orchestrated smash a la February 2014, or it could be the BIS' gold and FX trading desk under Benoit Gilson, or it could be just a massive Chinese commodity financing deal unwind as we schematically showed last March...

... or it could be simply Citigroup, which as we showed earlier this month has now captured the precious metals market via derivatives.


Whatever the reason, gold just had its biggest flash crash in nearly two years, as a targeted stop hunt launched by the dumping of $2.7 billion notional in product, accelerates the capitulation of the momentum buyers (and in this case sellers) pushing gold to a level not seen almost since 2009.

The price appears to have rebounded after the initial shock, up about $20 from the intraday low of $1,086 but we expect that to be retested shortly, and for gold to plunge further into triple digits, at which point gold miners will simply cease to produce the metal whose all-in production cost is in the $1100 and higher range, when it will also become clear that only derivatives and "paper" are the marginal "price" setters.

But perhaps the biggest irony of the night is that moments before the flash crash, the PBOC revised its shocking Friday announcement revealing its gold holdings had increased by 57%. As Bloomberg said:


Previously, this was said to be 53.31 million ounces or 10,000 ounces lower, confirming China is literally just making up gold inventory "numbers" as it goes along, and clearly buying ever more physical while the price of paper precious metals conveniently plunges ever lower.



And now:

One thing is certain: the PBOC will be quite grateful to whoever (or whatever) was the catalyst for the latest and greatest gold flash crash as well.

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JustObserving's picture

"someone" sold $2.7 billion notional in gold, resulting in a 4.2% crash in gold, which tumbled to the lowest level since March 2010.

Must be trying to get the best price for his/her gold.  

Captain Debtcrash's picture
Captain Debtcrash (not verified) JustObserving Jul 19, 2015 10:35 PM

Something doesn't feel right about this, that's for sure, late at night and managing to push gold below technical resistance.  I'll keep backing up the truck, because I know at some point bonds will no longer be the prefered safe haven.

JustObserving's picture

US bonds will crash - not sure when:

Fed says inflation in USA was 0.8% in 2014.  Chapwood Index says it was 9.7%.  So what are the consequences?

Let's use a Zero Coupon Bond Calculator to see the effect of fake inflation on a $1000 bond  for 30 years:

A zero coupon bond is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity

With Fed's 0.8% fake inflation, Zero Coupon Bond Value = $787.38

With Chapwood inflation of 9.7%, Zero Coupon Bond Value = $62.20

So with Fed's inflation assumption, you can borrow $787.38 for 30 years and pay $212.62 as interest

With Chapwood inflation, you borrow $62.20 for 30 years and pay $937.80 as interest

With Chapwood Index, if you borrow $787.38 for 30 years, you pay $11,871 as interest.  Or 55.83 times  that with the Fed's inflation  adjustment.

remain calm's picture

It is my belief that the CB are going to try and lower the price of gold to 900, so they can shake the weak hands to help replenish their vaults. Also, remember the Chinese investors are getting margin calls. They can not sell stocks because that is illegal, so they are selling what they can and that is gold.

My recommendation is to not sell any of your physical gold and hedge your account with an equal amout of the DGLD (3x Reverse ETF), and when gold hits 900 sell it and you will not have lost a penny of your net worth and then you have only upside on your physical.

Publicus's picture

China won't save you goldtards, see my previous comments as to why.

Philo Beddoe's picture

Who gives a fuck what you think? YEah, I am going to waste my time reviewing your previous posts. 

Bunghole's picture

The little girl's anger in her post tells me she bough at the peak and sold well below to pay the cable teevee bill and HELOC that came due.


lickspitler's picture

Watching all the stackers  screaming Troll to the Gold bears is just a joy to watch.

Can't lose if you don't sell right.



Philo Beddoe's picture

Ever heard of something callled conviction? If that is too difficult to grasp...imagine planning 10 years out.  Of course, I am concerned about the price movement...but that does not mean I have lost my conviction. 

That, and you come off like a cunt, IMO. 

Keyser's picture

Never mind Clint, some folks have an investment strategy with a timeline as long as their dicks... 

Four chan's picture

im trying to have a stack that weighs as much as i do, and i'm 20 lbs overweight. 

macholatte's picture

"someone" sold $2.7 billion notional in gold,


The NSA knows how many pimples are on your ass but a $2.7B transaction is a mystery.

"They" know. They just ain't talkin.



wee-weed up's picture

TPTB laugh now...

We'll laugh later.

Keyser's picture

No coorelation between China's revised gold holdings and this smackdown, no, none at all... Now move along, nothing to see here... 

As for the king's whore, stop peddling your ignorant blog on ZH... Have you no class? 

VinceFostersGhost's picture



Rosebud said this would happen.


It's like welfare for China.

chubbar's picture

Well, if they drive the price down to sub 1,000 and 10 for silver then hit the reset button, they can then hit everyone for windfall taxes. Regardless, deflation means the gov't goes out of business sooner, not later. They haven't reported the deficit since march and it appears that the reason why is because they are in technical default on the limits. They are trying to whipsaw folks out of their position, WHATEVER it is. Stocks will crash if deflation takes hold to any extent, that will start the ball rolling. At this point they have so many "balls" in the air (bonds, stocks, housing, gold, silver, etc) that for them to keep control of all of them will be a miracle. Just one of them going against their plan will bring the whole house of cards down around their heads. Of course it all could be "the plan" and they want everything to be as far out of whack as possible so that the reset collapses all values while gold/silver are at their lows resulting iin a lack of liquidity for the little guy to get into the stuff while those cashed up get the buy of a lifetime. Whatever the game, it's clear from the derivatives book of Citibank that precious metals are being manipulated and HUGH bets are being placed. Who the fuck thinks that multi-trillion dollars in derivatives bets over the span of a few months is the normal course of affairs? You have to be a dumb fuck to sit here and not question that fact and how it plays into the pricing action!

Mr. Magoo's picture

At this point, who cares!! this whole system is going down the shitter at least there will be plenty of TP to wipe my ass with when its over

Al Gophilia's picture

Obviously, they've fixed the Euro and the US debt. Hi Ho Dollar!

bunnyswanson's picture

The Grande Design: The Hidden Plan  -  G. Edward Griffin 1968 - US Foreign Policy -

Over 1 hour


Tall Tom's picture

Thanks. I am enjoying it.

VinceFostersGhost's picture



I'll take it....thanks a lot.

TeethVillage88s's picture

macholatte, what you said could fill a booklet on what is wrong with the USA/Canada/UK/EU.

Model T's picture
Model T (not verified) summerof71 Jul 20, 2015 1:05 AM

Nothing looks like it;s "headed" for anywhere. Today's price has no predictive value.

Philo Beddoe's picture

Thanks, coach, for the sage wisdom.  You have a keen grasp for the obvious delivered as though it was recieved by Moses behind the burning bush.  That, and what you wrote is horseshit. Pull up a weekly chart on the S&P. There is your predictive value. 

mkhs's picture

Burning bush: now there is an interesting idea.

hibou-Owl's picture

I agree Silver chart looks very soft, my target sub 10 USD

VinceFostersGhost's picture



If you're not buying it never will.


See you later.

CPL's picture

PM's are going to zero along with every fiat currency. That was mathematically guaranteed in the ponzi offered as an economy.

BitCoin however is being steady, stable, boring, holding steady and organically growing with adoption in the economic market being built in parallel to the debt run shit show.  Which is exactly what anyone should expect from currency or any trade material in general.  After it's passed the magic 5% population adoption threshold, governments can actually get back to being governments instead of poorly run collection agencies and thugs scrambling to act as middle men in every transaction.  Then things might start improving once all that poorly focused energy is re-channeled in the correct direction.

zerocash's picture

You'd be literally worth your weight in gold!

cornflakesdisease's picture

Hmm, lets see:  I buy gold for 20 to 25 years from now. 


Will the governments 2o years from now get wise, balance their budgets, and use sound fiscal judgement, or hit the burbon and full speed ahead?


I think I know that gold will buy 20 years from now, the same amount of chicken noodle soup it will today.


I'm sticking with gold.

umdesch4's picture

Interesting that you say this, only because I was just going to post the same thing. I might be considering some physical gold sales in 20-25 years (if I can still find where that bizarre boating accident happened), but "weak hands" is synonymous with "weak minds" at this point.

Rock On Roger's picture

The price of coffee is fairly stable when valued in gold.


Sure I can't eat it but I betcha I could trade it.

nopalito's picture

I understand what you are trying to say, but I don't think "fairly stable" is how to describe when a pound of coffee fluctuates between 25 and 70 mg of gold over the past 10 years.

FireBrander's picture

When the gold bull run died in 2011 at ~$1850, the three down waves from the top suggested an eventual sub $1000 price...most likely $900 being a real technical bottom....I've been savaged all the way...keep neg-en me fools.

daveO's picture

Right. 881/oz. is .615 of the total move(1850-275), but 1000 is a biggie. More QE, anyone?

CoolClo's picture

".....three down waves from the top suggested an eventual sub $1000 price."

Gold Previous Wave 4 support at 681.. ...GLD at 66

Squid-puppets a-go-go's picture

$900 bottom as a technical, eh?

So what you're effectively saying is that despite the trillions and trillions in credit and fiat expansion, gold is no more valuable in dollar terms today than in 1979?

technicals are goalseeked rubbish. in a anipulated environment they are meaningless


ebworthen's picture

Two profiles for pubi-cus?

Timothy Geithner?  Is that you?

Hank Paulson is too busy sipping vodka spiked Ensure...

Philo Beddoe's picture

Hank Paulson, the guy with the milk moustache who does not drink milk. What is the mystery white fluid that surrounds his mouth? 

A Nanny Moose's picture

Sell for what? Cash? interesting.

Took Red Pill's picture

Exactly! Many of you nay-sayers are looking at this the wrong way. You are comparing gold with US dollars. Dollars have no backing and are created out of thin air. Gold is REAL money and has been for thousands of years. When the price goes down, I get excited because I can buy more at a better price. At some point, after the dollar crashes and loses it's reserve currency status, I can trade gold & silver for things I need or whatever the currency of the day is. The dollars days are numbered and big changes are coming. Why do you think countries and central banks hold so much gold?

Publicus's picture

So much anger.... how much did you lost on Gold so far when you could have made a bundle buying the NASDAQ thanks to the Fed?

Bunghole's picture

My father started stacking at $80.  I started stacking at $400.

Keep talking shit assmaggot.

You'll be cleaning my septic system before this is over.

lickspitler's picture

My father started stacking at $80.  I started stacking at $400.


My son will keep buying at $5

Publicus's picture

Given that he has averaged in, his cost basis is prabably in the $800, so another 2-4 years he'll be crying.

Keyser's picture

Why do so many morons adopt populist NICs when they join ZH...  

TheReplacement's picture

Curiously, your question provides its own answer.

VinceFostersGhost's picture





So many few nailguns.