Was the gold drop a result of high frequency trading? - Video

In an interview with Kitco News, Frank Holmes, the head of U.S. Global Investors, has discussed the recent drop in the prices of gold suggesting it was a major player dumping the metal.

“Recognize this was a 2.7 billion dollar notional value trade that hit the market about 18 months ago – last month the investigation by Comex showed it was a high frequency trade and they spanked people by slapping them on the wrist," Holmes explained adding that it is possible to do this in financial markets as long as the price of commodities falls down.

"It is very distressful for investors but a great short term opportunity to reposition your portfolio.”

The analyst added he is now focused on this week’s China flash manufacturing PMI. If it runs over 50, the commodity trade will be turned to a positive note, Holmes thinks.

Looking at PMI data, a reading of 50 and higher indicates manufacturing expansion, while a reading below 50 indicates a slowing economy.