The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title – anonymous

At opening bell of April 30, 2012, an anonymous player sold short $1.24 billion worth of gold. At three quarters of a million ounces, the sale slammed through over 1000 bids, up to 8400 ounces apiece in a fraction of a second. Even the Wall Street Journal ran an article on manipulation – the dump exceeded an entire average day’s trading. The perpetrator broke the law and took rapid losses of $75 million as the gold price reasserted itself in a few hours.

The WSJ failed to note that these contracts were not longs liquidating, but naked shorts – a party selling gold they did not have. These are done without posting margin. The activity is blatantly illegal.

Nonetheless, sells of this type (though not this size) are fairly common. Many occur in a thinly traded period of the day – 3am – making it doubly suspect from a profit point of view. Without multiple buy orders to hold up the price, the seller gets less and less money with each bid filled. No trader would do this for profit – if they were seeking a profit, they would have parceled it out over a period to avoid dropping the price.

The Fat Finger has been offered as an explanation. A trader could have keyed in an extra zero after the number of contracts. While this is possible, it’s highly unlikely that a sophisticated trader or trading system would have no safeguards against hundred million dollar losses because of a single accidental keystroke. The accident theory is implausible. The move more or less screams manipulation. Somebody controlling a lot of money wanted to slam the price of gold and could afford to take a sizeable loss. But why do it?

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