Gold prices were little changed at $1,238.80 in early trading today (Tuesday) after falling $30 an ounce Monday in mere minutes.
Trading in February Comex gold futures was halted for 10 seconds Monday when a suspected "fat-fingered" (aka erroneous) trade sent the contract tumbling more than $30 an ounce in just minutes.
Heavy volume was recorded in gold futures at the time of the price drop. Some 11,000 contracts, equivalent to 1.1 million troy ounces and worth about $1.3 billion, were traded in one minute at 10:14 a.m. EST. That was roughly one-tenth of gold's recent daily trading volume. The February contract slipped from $1,245.40 an ounce at 10:13 a.m. to $1,214.89. By 10:15, the price recovered to $1,234.50.
One transaction for 4,000 contracts executed in that one-second timeframe, at an average price of $1,231.93 an ounce, resulted in proceeds of $492.77 million, according to The Wall Street Journal.
The Chicago Mercantile Exchange said no error occurred and confirmed all trades will stand.
Traders, however, were quick to place the blame.
Gold Price Flash Crash: What Happened?
Some accused a keyboard error for the sudden spike in volume and subsequent price plunge. Some cited a large trade from a pressured hedge fund.
"Maybe a hedge fund was blown out a position and they had to sell," Rick Ilczysyn, chief market strategist with Chicago based future brokerage iiTrader, told The Journal. "Funds carrying unprofitable positions are sometimes forced to buy or sell in the market to rebalance their investments."
Others placed the responsibility on high-speed trading.
A more likely scenario, given the size and speed of the trade, was algorithm-driven trading. The unusually large number of contracts traded are an amount humans simply aren't capable of executing in such a narrow span, industry experts say.
"One thousand contracts (in a second) is high, and in the past year that has halted the market several times," Eric Hunsader, chief executive officer of market data provide Nanex LLC, explained to The Journal. "Seeing something over 2,000 contracts in a second in very rare, and here you have 4,000 contracts."
Also rare and noteworthy was how resilient gold remained and how quickly prices recovered.