'Fat finger,' Wall Street Journal? No, government's heavy hand on gold

Section:

9:17p ET Monday, April 30, 2012

Dear Friend of GATA and Gold:

The Wall Street Journal, which back in December published an essay by a recently resigned member of the Federal Reserve Board complaining that "policy makers" were "suppressing market prices that they don't like" and then, despite GATA's many importunings, refused to ask him to specify which prices and to explain whether he knew about this price suppression because of his service at the Fed --

http://www.gata.org/node/10839

-- today committed an equal act of journalistic obtuseness. It's appended.

The Journal noted this morning's strange and seemingly uneconomic smash down in the gold price and strained mightily to attribute it to a mistaken "fat finger" trade -- even though the "mistake" would have involved more than a billion dollars' worth of gold and this sort of thing lately has been happening practically every other day.

A far more obvious and plausible explanation is that the trade wasn't uneconomic at all -- that it was part of a central bank-sponsored defense of a short position in gold or a defense of a competing currency or both, part of the longstanding Western central bank scheme to rig the currency markets and particularly the gold market:

http://www.gata.org/taxonomy/term/21

But at least these odd movements in the gold market have become so blatant as to command even the Journal's attention, to the extent that the newspaper is compelled to contrive excuses and distractions. That's progress.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Gold Shakes Off $1.24 Billion 'Fat Finger'

By Tatyana Shumsky
The Wall Street Journal
Monday, April 30, 2012

http://blogs.wsj.com/marketbeat/2012/04/30/gold-shakes-off-1-24-billion-...

Gold futures ended nearly unchanged Monday, after a large early-morning sell order roiled traders and slashed prices by almost $15.

The CME Group Inc.'s Comex division recorded an unusually large transaction of 7,500 gold futures during one minute of trading at 8:31 a.m. EDT. The sale took out blocks of bids as large as 84 contracts in one fell swoop and cut prices down to $1,648.80 a troy ounce. The overall transaction was worth more than $1.24 billion.

Gold traders buzzed with speculation that the transaction was an input error -- a so-called "fat finger" trade.

"Or a Gold Finger as it might be known in the bullion market," traders at Citi joked in a note to clients.

... Dispatch continues below ...



ADVERTISEMENT

Prophecy Platinum (TSXV: NKL) and Ursa Major Minerals
Sign Combination Agreement

Company Press Release
Friday, March 2, 2012

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) and Ursa Major Minerals Inc. have signed a binding letter of agreement for a business combination through a proposed all-share transaction. In doing so Prophecy and Ursa have acted at arm's length and the transaction has been negotiated at arm's length.

Prophecy will issue one common share in exchange for every 25 outstanding common shares of Ursa. Ursa options and warrants will be exchanged for options and warrants of Prophecy on an agreed schedule.

Prophecy's offer represents a value of about $0.15 per each common share of Ursa based on Prophecy's share price of $3.70 as at March 1, representing a premium of 130 percent to Ursa's March 1 closing price of $0.065.

Prophecy is to subscribe for $1 million common shares of Ursa by way of private placement financing at $0.06 per share, subject to regulatory approval. Upon placement completion, John Lee and Greg Hall, current Prophecy directors, will be appointed to Ursa's board.

Prophecy thus will become a mid-tier resource company with a robust and diversified pipeline of platinum nickel projects, including:

-- The fully permitted open-pit Shakespeare PGM-Ni-Cu mine close to Sudbury, Ontario, infrastructure with near-term production capabilities.

-- The flagship Wellgreen (Yukon) PGM-Ni-Cu project with more than 10 million ounces of Pt-Pd-Au inferred resource. Drilling is under way and a preliminary economic assessment study is pending.

-- Manitoba's Lynn Lake Ni-Cu project with more than 262 million pounds Ni and 138 million pounds Cu measured and indicated.

For the complete announcement, please visit Prophecy Platinum's Internet site here:

http://www.prophecyplat.com/news_2012_mar02_prophecy_platinum_ursa_major...



One indicator that the transaction was a mistake was its size. At 750,000 troy ounces, such large trades are rarely conducted amid very thin trading volumes. Monday trading was expected to be quiet as market participants in China and Japan are out on holiday and many European traders are preparing for a holidays there.

"No one who has the account size and the money to trade thousands of gold contracts would do it in one transaction -- that's just stupid," said one trader. The collateral required to purchase 7,500 contracts is about $75.9 million in cash that the trader would have deposited with his broker.

Moreover, the likely mistake is symptomatic of the shift to electronic trading. Computer trading systems are vulnerable to input errors, as they do not question the order before executing the transaction. By contrast, when most order flow would pass through the Comex floor where human traders processed the deals, potential errors stood higher chances of being intercepted, traders said.

"You would definitely verify [a trade this big] before you executed it," said one Comex floor broker.

Still, not everyone agreed Monday's slip in gold was caused by a keystroke error. Chuck Retzky, director of futures sales for Mizuho Securities USA, said that silver prices suffered a similar leg down at the same time as gold, tumbling 35 cents to $30.805 a troy ounce, but other markets like Treasurys, currencies, and stocks were unperturbed.

"To do it both in gold and silver tells me that it wasn't a trade done in error," Retzky said. He added that the sale could have been caused by a trader looking to cut back holdings on the last trading day of April, as fund managers often time purchases and sales for particular reporting periods.

Meanwhile, gold prices spent much of Monday shaking off the early-morning losses and finished the day nearly unchanged at $1,664.20 a troy ounce.

* * *

Join GATA here:

Las Vegas Money Show
Caesar's Palace, Las Vegas
Monday-Thursday, May 14-17, 2012
http://www.moneyshow.com/tradeshow/las_vegas/moneyshow/

Committee for Monetary Research and Education
Spring Dinner Meeting
"Money and the Corporate State"
Union League Club, New York, N.Y.
Thursday, May 17, 2012
http://www.cmre.org/

Vancouver World Resource Investment Conference
Sunday-Monday, June 3-4, 2012
Vancouver Convention Centre East
Vancouver, British Columbia, Canada
http://www.cambridgehouse.com/event/world-resource-investment-conference

Standard Chartered's Earth Resources Conference
Wednesday-Thursday, June 20-21, 2012
J.W. Marriott, Hong Kong
http://www.standardcharteredsignatureevents.com/earths-resources/welcome...

Hong Kong Gold Investment Forum
Monday-Wednesday, June 25-27, 2012
Renaissance Harbour View Hotel, Hong Kong
http://www.hkgoldinvestmentforum.com/

New Orleans Investment Conference
Wednesday-Saturday, October 24-27, 2012
Hilton New Orleans Riverside Hotel
New Orleans, Louisiana
http://www.neworleansconference.com/

* * *

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16



ADVERTISEMENT

Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf