Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Physical Gold Immune to Flash Crashes

  by    0   0

Yesterday a British stock trader was arrested on criminal fraud charges for stock market manipulation. The Commodity Futures Trading Commission and the United States Department of Justice accused Navinder Singh Sarao of single-handedly triggering the “flash crash” of May 2010. During this crash, the Dow Jones Industrial Average plunged about 600 points in just minutes, representing a loss of almost $1 trillion in market value.

15 04 22 flash-crash

Sarao used computer programs to trade E-mini S&P 500 futures contracts in massive quantities. Sometimes he accounted for 40% of market activity, according to the CTFC. He supposedly made $40 million in profits over four years.

The news highlights just how fragile the financial “paper” markets can be. Often a dramatic event like the 2010 flash crash can be caused by just a few market players, though they are often part of a large institutional firm. In this case, a single trader using computer software allegedly spooked the markets enough to cause a major panic and temporarily destroy the value of hundreds of companies.

Futures contracts are a very popular method of investing in gold nowadays. They allow speculators to bet on whether the price of gold will go up or down in the future. This case serves as a stark reminder of how volatile the value of those futures contracts are. When you invest in gold through the futures market, you don’t actually own or possess the physical metal. Instead, your so-called investment is merely as stable as the bits and bytes in the computer system that someone like Sarao could manipulate.

Physical gold bullion, on the other hand, is insulated from rogue traders and major manipulation through computers. Gold reserves are dispersed throughout the world in central bank vaults, individual security deposit boxes, under the beds of Chinese housewives, and perhaps even buried in your own backyard. It’s next to impossible for a single entity to gain control of 40% of the physical gold and destroy the value of your gold holdings.

Get Peter Schiff’s latest gold market analysis – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Gold Hits New All-Time Record High

Gold hit a new all-time nominal high, surpassing the previous record set in December of the previous year. The precious metal’s price reached approximately $2,140, indicating a robust and continuing interest in gold as a safe-haven asset, despite a rather peculiar lack of fanfare from the media and retail investors. This latest peak in gold […]

READ MORE →

Is a Weak Yen Feeding the Global Gold Bull?

The gold price has been surging, with unprecedented central bank demand gobbling up supply. It has been a force to behold — especially as US monetary policy has been relatively tight since 2022, and 10-year Treasury yields have rocketed up, which generally puts firm downward pressure on gold against USD. 

READ MORE →

World Gold Council: “Blistering Central Bank Buying” Fuels Strong Gold Demand

Total gold demand hit an all-time high in 2023, according to a recent report released by the World Gold Council. Last week, the World Gold Council (WGC) released its Gold Demand Trends report, which tracks developments in the demand for and use of gold around the world. Excluding over-the-counter (OTC) trade, 2023 gold demand fell slightly from 2022 […]

READ MORE →

VIX – The Calm Before the Storm

The VIX, often referred to as ‘Wall Street’s fear gauge,‘ is currently portraying a sense of calm among investors, registering well below the 20 level. 

READ MORE →

Four States Consider Lifting Taxes on Precious Metals

Citizens of Georgia, Kentucky, Wisconsin, and Kansas may soon enjoy lower taxes on precious metals if recently introduced pro-metal bills are made law in 2024.

READ MORE →

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Call Now