Following the release of an International Business Times report detailing how the dramatic crash of the gold price in April of last year, the Certified Gold Exchange is warning investors about the correlation between computerised trading of gold derivatives investments and the value of physical gold.
The IBT article stated that over 1,000 unique entities sold gold within a 10-minute window last April and that the gold spot price dropped US$24 per ounce due to the exchange of 2.4m ounces of gold.
“A US$50 shift in the gold spot price in one day is huge, and last April we saw gold fall more than US$200 in less than two trading days,” said Certified Gold Exchange spokesperson Janet Jones. “Many investors who buy physical gold do so for the safety aspect, but this does not mean that they will accept technological manipulation of the gold spot price.”
Futures markets are not controlled in the same manner as are stocks, and Jones says the Dodd-Frank Act, meant to regulate leveraged and non-physical gold investments, is a good start but not enough to protect the physical gold market. “We understand that ETFs and other derivative investments played a large part in last year’s crash, but for millions of ounces of gold to exchange hands in less than 10 minutes is unacceptable for investors who purchased physical gold to avoid the manipulation that is often found in derivatives exchanges.”