CME Group Inc.’s Comex halted trading in December gold futures for about 20 seconds today at 2:54 a.m. New York time after prices declined, said Damon Leavell, a spokesman for the exchange.
The December contract fell almost $12 within two minutes before trading was suspended, data compiled by Bloomberg show. The so-called Stop Logic halt, engineered by the exchange, is designed to prevent excessive price movements, Leavell said, while declining to comment on the size of the trade that led to the halt.
“The stop-logic functionality happens across all markets at different times, and can even happen several times in a day,” Leavell said by telephone from New York.
Gold prices dropped 19 percent this year through yesterday as equities rallied and amid concern that the Federal Reserve will slow the pace of its stimulus program, eroding demand for the metal as a hedge against inflation. A Bloomberg survey on Sept. 6 showed that the Fed will probably reduce its monthly bond purchases by $10 billion at its meeting next week. Bullion climbed 6.3 percent in August amid concern that the U.S. would launch a military attack on Syria.
“Gold is playing chicken with the Fed,” Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. “Investors are reassessing the premium on gold as the worries about war are drifting away and the world economy is showing signs of improvement.”
The so-called Stop Logic creates a momentary halt in the market, giving the trading community the opportunity to provide additional liquidity so proper prices can be re-established and the market can regain its equilibrium, CME said in a statement in May.
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