Whipsawing Million-Ounce Gold Trades Are Becoming the New Norm

Updated on
  • Spikes ‘seem to be more frequent than they ever were’: RJO
  • Metal erases losses Tuesday after sudden plunge earlier
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Gold traders are having to grow more accustomed to surges in trading volume as spikes that began surfacing around mid-year become more frequent.

In the 10 minutes ended 3:10 a.m. in New York on Tuesday, when most North American traders were probably still asleep, contracts representing more than 2 million ounces of the metal changed hands on the Comex, sending prices down as much as 0.7 percent. The bulls responded hours later, with trades covering more than 3.5 million ounces at around 10 a.m., helping to push the price higher.

The erratic volume, including in the wee-hours, is going from an oddity to a more regular feature of trading, bringing more excitement into a market that’s otherwise been in a slumber. The 60-day historical volatility in gold futures is still near the lowest since 2001, leaving little opportunity for traders to make a profit from going in and out of the market.

Those spikes “seem to be more frequent than they ever were,” Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “With volatility this low, when you do get size on the bid or ask, it exaggerates the moves in the market.”

On Friday, trades covering almost 4 million ounces of gold changed hands in a span of 10 minutes, triggering a sell-off that sent prices down as much as 1.1 percent. Last month, contracts representing over 2 million ounces were exchanged in just five minutes. In August, when volume typically falls off as more traders go on summer vacations, futures equal to 2 million ounces were bought and sold in a minute. In June, the market saw trades for over 1.8 million ounces posted in the same time span.

By 2:02 p.m. in New York on Tuesday, Comex gold volume was 26 percent above the 100-day average for this time, according to data compiled by Bloomberg. Prices settled at $1,282.90 an ounce, posting a second straight gain.

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