How much gold has to be sold globally to raise or lower the price by 1 cent ?

Earlier today, I checked the latest price of gold (per gram) in the following graph and noticed that in the 2 hour period between 1am and 2am (NY time), that gold had taken a dive, losing a total of 39 cents per gram.


This got me thinking.

Does anyone have any idea just how much gold (in kilos) would have to have been "dumped" globally in that 2 hour period to cause such a loss ?
Also, assuming that this isn't just a single gold transaction but many, how exactly is this "dumping" coordinated globally ? I assume that someone makes a gold sale initially but what convinces everyone else to also sell in that same 2 hour period ? In fact, why sell at all just because someone else just sold some gold ?

How much gold has to be sold globally to raise or lower the price by 1 cent ?

none

Very little actual gold is sold, But a lot of paper that claims to represent gold that may or may not be in a vault some place.

there has never been a accounting of any company that sells paper gold to see if they hold the amounts of gold to cover the paper they sell.

reply to post by tauristercus

I assume that someone makes a gold sale initially but what convinces everyone else to also sell in that same 2 hour period ? In fact, why sell at all just because someone else just sold some gold ?

Well I'm no expert on this, but I think it's usually caused when someone makes a huge sell order, others start to panic and sell before it crashes too low, increasing the effect. It's usually a very temporary phenomena, the price will probably go back up shortly as a bunch of people submit buy orders while it's cheaper than normal. That's my simplistic understanding of what happens anyway.

Both of the above answers are interesting in themselves, however that still doesn't answer EXACTLY how much paper gold/real gold has to be sold globally to drop the price down by 1 cent.

Are we talking a kilo or 2 ? Perhaps 20 kilos ? Maybe much more ?

reply to post by tauristercus

Are we talking a kilo or 2 ? Perhaps 20 kilos ? Maybe much more ?

Well I don't really think there is a solid answer for that, because it's all very speculative and price is based on what people perceive it to be worth. If the market seems like it is crashing, people will get scared and place lower buy orders, even though the "real value" of the gold probably isn't what the speculators say it is. The price of gold during the downfall isn't necessarily directly indicative of the amount of gold traded in that time.

Originally posted by bitfreak
reply to post by tauristercus

 

Are we talking a kilo or 2 ? Perhaps 20 kilos ? Maybe much more ?

Well I don't really think there is a solid answer for that, because it's all very speculative and price is based on what people perceive it to be worth. If the market seems like it is crashing, people will get scared and place lower buy orders, even though the "real value" of the gold probably isn't what the speculators say it is. The price of gold during the downfall isn't necessarily directly indicative of the amount of gold traded in that time.

I have to admit I'm confused.
Surely, the very act of selling affects the price immediately ... otherwise why would others feel the need to also sell ?
So somehow, there MUST be an algorithm that automatically adjusts the "immediate" price of gold based on how much has been bought/sold per unit of time. And if this is so, where is this software located and who controls it ?

Yeah it's simple supply & demand. People look at the price of gold, think "hey that's cheap", so they buy some. This sends the price up due to increased demand. Meanwhile, other people that bought some gold previously, look at the price increase and decide to get out while the price is high (so they can make a profit), so they sell part of all of their stock.

Now that there's more "units" available on the market, they aren't worth as much so the price goes down. The larger the buy/sell order, the more it impacts the price of each individual stock.

You'll see irrational decreases when a large sell order is submitted which drives the price down a coupla percent, and (usually newbies) dump their stocks thinking that the market is crashing....which only results in the price decreasing even further.

To make things more complicated you've also got automated software used by high-frequency traders that submits hundreds of buys/sell orders per second, trying to take advantage of the miniscule price rise/decreases over tiny time intervals (ie: buy HUGE amount of stocks @ $0.015, then sell them a fraction of a second later for $0.02 and make an easy coupla hundred/thousand dollars. Rinse and repeat as often as you can). You need significant amounts of capital to do this though due to the volumes you need to trade in order to turn a profit.

To make it even more complicated, sometimes the software algorithms will incorrectly believe there's an issue and dump all their stock to minimise loses. This has been known to cause pro traders to spaz out and dump their stock, which in turns makes the amateurs spaz and dump theirs, the end resulting being a market crash (the global financial crisis and its "aftershocks" is a good example of this happening).

reply to post by tauristercus

Surely, the very act of selling affects the price immediately ... otherwise why would others feel the need to also sell ?

It depends on the amount sold. If someone dumps a huge amount of gold onto the market, then speculators might reason that there's a deeper meaning to it, they might think someone in the know is selling before a large crash, but I'm not really sure what they think. So basically that entices others to sell and it causes a chain reaction of gold being dumped onto the market, which lowers the price perhaps because now it is less scarce and the market is flooded with sell orders which can't be matched by buy orders, so people keep selling lower and lower in a hope they'll get out before their gold becomes worthless. A small trade here and there wont really make the slightest of difference, the price of gold could remain stable for a year and lots of trading could go on during that year.

So somehow, there MUST be an algorithm that automatically adjusts the "immediate" price of gold based on how much has been bought/sold per unit of time.

The market price of gold is going to be subject to speculators, because their trades are what dictates the worth of gold. If low sell orders are being filled, the average market price is lowered because it takes into account those orders and says "ok, people are selling and buying the gold for a lower price than usual so it must be worth less". So the market price is not governed by some dictatorial algorithm, it is directly linked to the trades happening on the market. And those trades are based on prices determined by the buyers and sellers trading based on what they think gold is currently worth, making them the speculators. They could all decide to sell for less for no apparent reason other than everyone is doing it. That's how I understand it anyway, I could be wrong.

According to this, members of "The London Gold Market Fixing Pty Ltd" adjust the price of Gold twice a day. I have no idea how they determine what the "correct" price would be :/

en.wikipedia.org...

reply to post by tauristercus


That's a loaded question because it's depends on how much is being sold as well as how much is being bought. If there is demand the price won't drop as much.. you could have a normal amount of selling and an abnormally low amount of buying and see the price drop. Then it also depends on the current offers for Gold.. if there is a lot of selling and even if buying is high, if the volume is to high the price will be lower.

Perhaps I'm just being particularly dense today but as far as I can tell, none of the above responses really answered the questions of ....
(1) at ANY given point in time, HOW is the price of gold at that point determined ?
(2) WHO sets the price of gold at ANY given point in time ?

Surely some process must exist to determine that at time x, gold will be worth y dollars.

Here's my chart again and if you look at the vertical line representing 2am, you can see that gold started of with a value of $53.91 and within seconds (or minutes), fell to approximately $53.75 - a loss of 16 cents.


Again my questions ... at approximately the 2am time period, how was the initial $53.91 value determined and by whom ... how, moments later, was the final value of $53.75 determined and by whom ?

As an example, say I was to dump/sell 100 kilo of gold, Obviously the market will reflect this sale and readjust the price of gold accordingly. But how is the NEW price of gold calculated just seconds after my sale and HOW is the EXACT dollar and cent worked out ?

Originally posted by tauristercus

Perhaps I'm just being particularly dense today but as far as I can tell, none of the above responses really answered the questions of ....
(1) at ANY given point in time, HOW is the price of gold at that point determined ?
(2) WHO sets the price of gold at ANY given point in time ?


The easy way to answer both 1 and 2

(1) Supply and Demand
(2) Supply and Demand

You are not being dense you just don not understand what is going on.

Surely some process must exist to determine that at time x, gold will be worth y dollars.

Nope.

So that graph shows the value of USD against the value of physical GOLD. It has nothing to do with how much physical gold is traded. All it is displaying is the value of one item against the value of another item. In this case USD/GOLD.

What I believe you are thinking is that the two values are directly proportional to each other. They are not. Now if the value of the USD was backed by GOLD then the two values be directly proportional to each other.

Here's my chart again and if you look at the vertical line representing 2am, you can see that gold started of with a value of $53.91 and within seconds (or minutes), fell to approximately $53.75 - a loss of 16 cents.

Again my questions ... at approximately the 2am time period, how was the initial $53.91 value determined and by whom ... how, moments later, was the final value of $53.75 determined and by whom ?

Right that graph says that the value of the USD increased in its relation to the value of GOLD in that span of time. Again they are two different items with do different values determined primarily by their individual supply and demands.

As an example, say I was to dump/sell 100 kilo of gold, Obviously the market will reflect this sale and readjust the price of gold accordingly.
But how is the NEW price of gold calculated just seconds after my sale and HOW is the EXACT dollar and cent worked out ?

OK, physical GOLD is not the same as GLD ETF. They are two different things. So if you have a kilo of physical GOLD and you take to a storefront and sell it there will have absolutely no effect reflected in that ETF graph.

HI tauristercus. Before the NY Comex opens, the dominant pricing mechanism is the physical market in London. A lot has been written about the suspicious propensity for Gold to drop ahead of the AM London Fix which begins at approx 10:30 AM in London - 5:30 AM in NY.

Your chart:



Gold tends to stabilize or rise in overnight Asian trade, only to get bum-rushed on the thinly traded Globex [electronic] Exchange - heading into the London open.

GL

If you want to know what moves the price of gold try reading Harvey everyday as he analyses the Futures contract trading price which is what goldprice.org is showing second to second. harveyorgan.blogspot.com...

Most of the actual trading is done electronically with less than 2% of the contracts are bought and sold actually result in delivery of physical gold, so far.

"If you don't want to take delivery or you don't want to make delivery you have to roll or sell or cover your position BEFORE First Notice day.
Delaying issuing delivery notices indicates that the sellers don't have metal in the "registered inventory" of the Comex."
How the COMEX works

The price second to second is now mostly determined by high frequency trading computers doing millisecond trades.

"The detailed volume data from the CFTC's trader reporting system followed a review of the "flash crash" of May 6 2010, when stock and other markets momentarily plummeted and prompted calls for the reform of electronic trading."
High-frequency trading confirmed as big influence on futures markets

Then twice a day some people in London get on the phone and officially decide that the Futures price is close enough to the days fixed price.

"The fixing historically took place at the London offices of N M Rothschild & Sons in St Swithin's Lane, but since 5 May 2004 it takes place by a dedicated telephone conferencing system. Until 1968, the price was fixed only once a day, when a second fixing was introduced at 3 p.m. to coincide with the opening of the US markets, as the price of gold was no longer under control of the Bank of England, a result of the collapse of the London Gold Pool."
en.wikipedia.org...

Audacious Gold Manipulation

Monday, February 27, 2012 at 5:13 pm

So, what do we make of this. As a practical matter, the suppression has worked. Without three, consecutive days of $7 Globex raids, gold would be trading at $1790 instead of $1769. Every dollar counts, whether it's taken out on the Comex, the LBMA or the Globex.

That's all for today. Keep an eye on things overnight and expect the usual 3:00 am London raid. - Full Text

More Gold futures are traded electronically, online, using the CMEs popular Globex platform - than in the Comex floor session , because the Globex is essentially a 24 hour market allowing international participants easy access to NYMEX Gold futures contracts regardless of their respective time zones - while the Comex only trades weekdays from 8:20am to 1:30pm NYT, on the floor of the New York Mercantile Exchange.

The cartel bear raids often begin in "thin trading hours" (low volume hours) on the Globex as Asian participation begins to wind down, NY is still asleep, and London is sipping it's morning tea - consistently around 3am NYT - the window of opportunity.

Now, the "street crawlers" (JPM - HSBC etc) are CME Clearing Member bullion banks. This means they know at which price points the spec-long sell-stop orders are clustered. Armed with this information (stop densities) it isn't too difficult for a group of unscrupulous bullion banks (London desks in collusion) to initiate an avalanche of selling activity via the Globex while most NY traders are still sound asleep - and the Asians have gone home for the day.

The "thin trade" ploy can be used to manipulate Silver also.

JP Morgan Allegedly Telegraphed Silver Price Smashes Using Massive FAKE TRADES on Saxo Bank Platform

The suit also alleges that JPM made over 25 massive FAKE TRADES using Saxo Bank during sparse Globex evening hours prior to major silver raids for the express purpose of TELEGRAPHING AN IMPENDING SILVER SMASH TO THEIR BUDDIES! - Full Text