Gold futures tumble 1.5%; Traders cite potential “fat finger”

Investing.com - Gold futures tumbled more than 1.5% in a matter of minutes during U.S. morning hours on Wednesday, with some traders citing a “fat finger” occurred at a large U.S. bank.

Gold traders also remained fixated on concerns over Greece’s ongoing debt woes and the looming fiscal cliff crisis in the U.S.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,716.35 a troy ounce during U.S. morning trade, tumbling 1.65%.

Prices fell by as much as 1.8% earlier to hit a session low of USD1,713.85 a troy ounce, the weakest level since November 16.

Gold prices were likely to find support at USD1,705.55 a troy ounce, the low from November 16 and resistance at USD1,754.15, Tuesday’s high.

Gold’s losses accelerated ahead of the COMEX floor trading open, losing nearly USD20 in a matter of minutes.

Market participants noted heavy selling volume at 8:20AM EST, with some 35,000 contracts sold, equivalent to 3.2 million ounces.

Market talk that a large U.S. bank was attempting to roll over their December contracts, which expire at the end of Wednesday’s trading session, and instead outright sold them when floor trading opened was also cited as a potential reason for the collapse.

Meanwhile, traders continued to monitor developments surrounding the looming “fiscal cliff” in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.

Senate Majority Leader Harry Reid spooked investors Tuesday after saying that there had been “little progress” made toward reaching a deal by the end of the year.

There are fears the U.S. economy will fall back into a recession, unless a divided Congress and the White House can work out a compromise in the five weeks left before the January 1 deadline.

Doubts over the Greek debt deal also weighed. Greece’s constitutional lenders reached an agreement Tuesday to reduce Greece’s debt-reduction target by EUR40 billion to 124% of gross domestic product by 2020.

But the lack of detail on how Greece will implement reforms needed to meet its new debt targets dented investor confidence.

The news prompted investors to shun riskier assets, such as stocks and commodities, and flock to traditional safe haven assets like the U.S. dollar.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.2% to trade at 80.56.

A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

Elsewhere on the Comex, silver for December delivery dropped 1.95% to trade at USD33.41 a troy ounce, while copper for December delivery fell 1.3% to trade at USD3.506 a pound.