Gold Stops Trading For 10 Seconds After “Velocity Logic Event”

Precious metal speculators spent the day on a crazy roller coaster ride after gold tumbled $30 in seconds for no specific reason. The sudden shift set off what is known as a “velocity logic event” which stopped trading for 10 seconds. This is a fairly new action or term adopted by the CME to justify an immediate 10 second halt in trading. There has been a “stop logic” circuit breaker which has the ability to stop trading in the event of unforeseen trading activity or a massive market move that could overpower the computer software.  The new term “velocity logic event” is triggered if the execution price has moved the market up or down outside a predefined points value within a predefined time period, the Velocity Logic functionality is triggered and the instrument is placed in reserved state for a predetermined amount of time.

If you are a gold traders with hundreds of thousands of dollar or millions of dollars on the line these 10 seconds can seem like a lifetime. Yesterday’s event was not explained by the CME as trading resumed and gold eventually returned to its price before the event and closed just about flat for the day. Gold is trading up $1.90 this morning at 1239.90

In the first positive sign for gold Hedge funds and money managers broadly raised their net long positions in gold and silver futures and options in the week to December 31, data from the Commodity Futures Trading Commission showed on Monday but this could be accounts for as traders moved to safety before the holiday or repositioned themselves for the new year.

As expected Janet Yellen, a strong Bernanke supporter and a leading force in the Federal Reserve’s unprecedented and controversial efforts to boost the U.S. economy, was confirmed by the Senate to lead the central bank just as it begins to unwind that stimulus as Mr. Bernanke steps down at the end of the month.

Indian officials are in talks to cut a record high import duty on gold and relax rules on exports. Physical demand for gold in China moved higher as premiums on the Shanghai Gold Exchange climbed about $20.

Silver is trading on the up side recovering 72 points to trade at 20.175. Copper is slightly in the red this morning at 3.356. Copper prices remained flat for the day on Monday as mixed data coming from US and other economies kept the prices in range. CFTC said, hedge funds and money markets increased their bullish bets on Copper. US Dollar remained weaker yesterday helping Copper prices to recover from its initial loss. Traders can expect Copper prices to move higher for the day whereas other base metals can remain in a range as weaker dollar internationally and expectations of Chinese buying can keep the prices intact