The gold price got destroyed because five tonnes of bullion got dumped on the Chinese market

A 30-cm-long and 5kg gold Rolls-Royce model on display in China. Photo: ChinaFotoPress via Getty Images.

Gold had a “mini flash-crash” in Asian trade on Monday, with the price falling almost 4% in a matter of seconds.

Now it looks like we know why.

A huge dump of bullion, equivalent to one-fifth of a whole day’s trade in a normal session, came on the market in China this morning in a two-minute window.

ANZ analyst Victor Thianpiriya said in a note at the close of the Asia trading session that the “nature, size and timing of the heavy selling” suggests someone “was taking advantage of low liquidity or some sort of forced selling had taken place“. Here’s Thianpiriya with the details:

In Shanghai, close to 5 tonnes of gold was sold on the SGE in a two-minute window just prior to 9:30am, in a market where the normal volume traded is 25 tonnes in an entire day. The August 15 Comex gold contract also saw 7,600 contracts traded in the same two-minute window, though intraday trading data showed an unusual spike in Comex volume just before Shanghai, suggesting Comex gold lead the selloff, but SGE clearly exacerbated it.

Thianpiriya says the technical outlook is very bearish now for gold, saying “further downside risks remain” and that “other indicators also suggest the likelihood of an immediate rebound is low”.

“We would be sellers of rallies, and wary of buying dips,” the note says.

Here’s a chart of the crazy move in the gold price.

Gold stocks got run over in trade on the ASX today as a result. Evolution Mining lost 14% and Newcrest lost 10%.

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