If there was a "flashcrash" in gold, do you think brokers would honor it?

BigE · March 2, 2011 3:46PM

I noticed there is a straight down drop of 10.00 tonight in the price of gold, and I thought it would be great to hit apmex's button for 20 ounces of gold if it went down 300.00 or so, and then bounced right back up, just like what happened in the stock market (only a little more drastic). Then I wondered if the brokers would even honor it, maybe call it a freak error. What do you think, would it depend on how long the dip lasted? Should/would it make a difference if it lasted 15 seconds or 15 minutes? Do you think a precious metals "flashcrash" could occur and what are the chances, and should we be prepared to act. Lets discuss

---------------BigE

BigE · March 2, 2011 3:52PM

Forgot there might be a circuit breaker, anyone know what they are for the different PM's-------BigE

RedTiger · March 2, 2011 4:13PM

If you are talking GLD, I think the NYSE would back out any trades far off the beaten path. When the stock market flash crash occurred, stop loss orders that were close to the prices were honored (and human investors got skewered) while the far out trades were cancelled (and the computer automatons got a pass).

A firm trading physical is going to widen their spreads in a fast market. If there was a 30% one day move, they might take a temporary shut down or have a 25% differential between bid and offer (eg: buy at $1000, sell at $1250). Fast markets mean wide spreads, that's reality. Expecting a bullion firm to make a tight market when market moves are 1% like $14 per day on gold is one thing. To expect it when markets are moving fast is unrealistic and unlikely to be.

It might be possible to find an individual who is a motivated buyer or seller, in a private transaction that might have items for sale or an offer to buy at the current quote even if it is fast moving. To put it in forum terms, though, I'd guess slim and none would be the only ones selling near the quoted spot price on BST the day of a big 30% drop.

BigE · March 2, 2011 4:21PM

I found limit up and down for soybeans and corn, but cant find it for gold/silver, will keep looking, curious now

You would think online dealers at apmex would have to honor buys as long as they were within this range. I feel a "flashcrash" event could occur since it seems like a xclnt last gasp way for the greedy to operate---------BigE

derryb · March 2, 2011 10:15PM

no "circuit breakers" in physical sales. Only thing to protect a buyer is the honor and reputation of the seller. If their website takes your purchase order you should expect them to honor it. Most sellers have automatically updated prices that are tied to current spot. Not sure how often they reload the latest price. Kitco's pool account works similarly.

Tulving is the smartest: They quote their prices in an amount over current spot and require all orders to be placed over the phone.

RedneckHB · March 3, 2011 1:18AM

When silver dropped 25% in Jan/Feb 2010, didnt all the dealers suddenly have "not available" or "out of stock" signs up?

BigE · March 3, 2011 8:08AM

Found this todayguess there is no rules, funny conversation

roadrunner · March 3, 2011 9:43AM

One can't expect real dealers who buy and sell physical bullion to honor prices that are the result of a paper-induced "flash" crash. That's why when silver crashed to $9/oz in 2008 it was hard to find physical silver at less than $12-$14/oz.

roadrunner

BigE · March 3, 2011 10:27AM

<< <i>One can't expect real dealers who buy and sell physical bullion to honor prices that are the result of a paper-induced "flash" crash. That's why when silver crashed to $9/oz in 2008 it was hard to find physical silver at less than $12-$14/oz.

roadrunner >>

Wasnt even thinking of "coin shop owners" more along the lines of comex/globex and commodities brokers like lind/waldock---------------BigE

watercrest · March 3, 2011 10:30AM

Well, if a flash crash were to occur it would happen so fast, none of the retail investors could benefit from it. plus I don't think they have the ability to manipulate gold as easily as they do for individual company stocks

If there was a &quot;flashcrash&quot; in gold, do you think brokers would honor it?

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If there was a "flashcrash" in gold, do you think brokers would honor it?