Flash crashes are apparently becoming almost commonplace these days. This time it was the largest gold miner ETF that experienced a sharp, sudden decline before bouncing back just milliseconds later on Wednesday, December 3rd. This flash crash came less than a week after a similar sudden decline and bounce back in Apple Inc. (NASDAQ:AAPL).
The Market Vectors Gold Miners ETF, which owns a basket of stocks including Goldcorp Inc. (NYSE:GG) and Barrick Gold Corporation (NYSE:ABX), was moving up at $19.60 just seconds before markets closed, according to time-and-sales data from FactSet. But then its share price crashed nearly 10%, all the way down to $17.72, less than one second before closing. The ETF’s price then jumped higher just before the close to end the day up 0.3% at $19.25.
Unusually volatile trading
Analysts note that gold miner ETFs tend to be among the most volatile on the market, and gold ETFs have been very active in recent weeks as gold prices dropped to new lows. Of note, over 52 million shares of Market Vectors Gold Miners ETF (NYSEARCA:GDX) traded on Wednesday, more than all but two stocks on the S&P 500. The ETF was down 8.7% last Friday in its largest drop in 18 months, then recouped practically all of the losses in trading on Monday.
Gold ETF price relationships strained by flash crash
The volatility in the gold miners is straining the usual price relationships between funds. Wednesday’s move up in Market Vectors Gold Miners ETF price was, however, nowhere near the move in the NYSE Arca Gold Miners Index, which rose 2.8%. The two ETFs typically move up and down in tandem.
The impact of Market Vectors Gold Miners ETF’s flash crash on the daily moves in leveraged gold miner ETFs that provide more-than-market returns in the NYSE Arca Gold Miners Index was unclear. Direxion Daily Gold Miners Bull 3x Shares were up 5.5% on Wednesday, but its sister fund, Direxion Daily Gold Miners Bear 3x Shares, was down by 2.6%. Prices in these two funds also usually mirror one another closely.