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The Multi-Billion Dollar Gold Trade Confusing The Market

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The Multi-Billion Dollar Gold Trade Confusing The Market

A sudden surge of volume in gold on Friday was seen in the corresponding exchange traded index SPDR Gold Trust (ETF) (NYSE: GLD) and caught many investors by surprise, Bloomberg reported.

Shortly after 9:30 a.m. Friday, approximately 2 million ounces of gold were traded, which carries a value of around $2.6 billion. The sudden surge in activity came at a time when volatility in the gold market was at its lowest levels since 2005.

Volume in the gold market surged to 21,256 gold future contracts at 9:41 a.m., but within one minute, volume fell to 6,683 contracts.

The timing of the trade isn't necessarily a coincidence as it occurred less than 30 minutes before the Federal Reserve's Chair Janet Yellen was scheduled to deliver a speech in Jackson Hole, Wyoming. Also, the Federal Reserve Bank of Dallas' President Robert Kaplan did comment ahead of Yellen's speech that the central bank may be patient in raising interest rates even higher but will also start shrinking its balance sheet.

"Kaplan was dovish and sent it higher," Robin Bhar, an analyst at Societe Generale AG, told Bloomberg. "I don't know if anyone then got wind of what Yellen was going to say, but it then dropped like a stone. And then, when she didn't mention monetary policy, things started to stabilize again."

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