Futures & Commodities

Gold’s plunge blamed on one massive sell order

Gold trading halt lasted 10 seconds
Gold trading halt lasted 10 seconds

Gold lost $25 in two minutes on Friday morning, as the gold market experience a massive surge in volume that triggered a halt in the middle of the plunge. The move took gold down to a three-month low, and was felt across the commodity markets. And incredibly, a single sell order could be the culprit.

"It appears to have been an order to sell 5,000 gold futures contracts at market," Eric Hunsader of Nanex told CNBC.com, when asked to explain the swift move at 8:42 a.m. EDT. "About 2,700 went off and tripped the stop logic, halting gold futures for 10 seconds while liquidity replenished. When enough liquidity returned (after 10 seconds), the balance of about 2,300 completed."

Steven Puetzer | Getty Images

The order was so big, then, that gold was automatically halted in the middle of the order being filled.

The CME Group confirmed the halt. "We had what we call a stop logic event, which is a momentary pause in trading." CME Group spokesman Chris Grams told CNBC.com. He noted that the halt started at 8:42:26 EDT, and trading resumed at 8:42:36. "All trades stand, and our technology performed as designed," he said.

If gold can't rally now, when can it?
If gold can't rally now, when can it?

"Five thousand lots is huge," commented Rich Ilczsyzn, the founder of iiTrader and a CNBC contributor. "We don't know if it's a mistake or not."

So huge, in fact, that the trade's impact was felt across the commodity market. Silver and platinum were hit at about the same time, and even crude oil appears to have been affected.

"Once gold broke, 10 minutes later, oil broke," Ilczysyzn said. Indeed, oil suffered a swift move down starting at 8:52, which brought oil below $101 a barrel for the first time since early July.

As of 11 a.m. EDT, gold was trading about 2.5 percent lower on the day.

—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.