Senior Trader Daily Update 27 June 2017

Good morning everyone.

There is no rhyme, reason nor logic behind the ‘clip’ of gold that was forced through the COMEX / CME August Gold Futures contract between 9.01am and 9:02am London which saw XAU/USD trade from 1254.3 down to 1236.50. In total 18,149 lots transacted (1.815 million ounces with a notional value of approximately USD 2.26 billion).
 
The most plausible of the reasons offered up around the market place was that it was a “fat-finger” flash crash trade (e.g. 18,000 lots executed instead of 18,000 ounces perhaps?). It’s hard to fathom that a central bank or a large fund would trigger such a ham-fisted execution, especially when significantly more liquidity would have been available with the arrival of New York participants in a matter of hours. Also lending credence to the “fat finger” theory was that there were no commensurate moves across any of the currency or equity markets, nor were there any statements made by any bureaucrats, officials or politicians at the time.
 
If it were done by design, then perhaps the fact that much of the northern hemisphere are on summer vacations which affects market liquidity and would therefore provide a short-seller with maximum impact, could go some way to explaining the move.
 
One thing is certain. This is not the first time this has happened to gold and it won’t be the last in these days of algorithmically-driven markets.
 
Technically, the major uptrend support lines that commenced in mid-December and have held solid in during recent probes were penetrated. In XAU/AUD this line was pierced briefly but the market managed to bounce and close above the line. Major trendline support now sits at AUD 1638 today and the technically all-important 200 Day moving average is located at AUD 1640.
 
The major trendline support in XAU/USD was decisively broken due to the downdraft but the decline halted at the 200 Day moving average at USD 1235.00.
 
Good luck.
 
Regards,
Andre