Chinese stocks rose and gold tumbled 4% after a huge sale in China. Anyone see a connection?

A record 3.3 million lots of the metal, or about 33 tons, were traded on a key Shanghai physical contract Monday, compared with less than 27,000 lots on Friday, reported Reuters. Up till now the average July volume has averaged less than 30,000 lots.

Right after the opening of the Shanghai Gold Exchange, the price of spot gold fell to $1,088.05 an ounce — its lowest price since March 2010. By midmorning in New York, the price was above the key $1,100 support level.

“We do see a lot of people in China selling gold to get fast cash to go back into the equity market,” a Singapore-based trader told Reuters.

Meanwhile, the Shanghai Stock Exchange Composite Index rose 0.9% to 3,992 on Monday. The Shenzhen Stock Exchange Composite Index gained 1.8% to 2,230; the small-cap ChiNext Price Index jumped 2.3% to 2,840 and the Hang Seng Index in Hong Kong ended basically flat.

Gold has been falling since it ended a 12-year rally in 2013, coinciding with a strengthening US dollar. But last week’s news that the dollar hit a three-month high and the US Federal Reserve Bank still plans to raise interest rates sparked what, as of Monday, is a six-day slide in the spot price. Still even with the Greek debt crisis and China’s falling stock market, nobody expected Monday’s steep decline.

It didn’t help that on Friday, China, which has been the world’s biggest buyer of gold, said its gold reserves were up 57% at the end of June from the last time it adjusted its reserve figures six years ago. Despite the tonnage increase, gold now accounts for 1.65% of China’s total foreign exchange reserves, against 1.8% in June 2009, said Reuters.

“It looks like the end of an era for gold,” Howie Lee, analyst at Phillip Securities in Singapore, told Reuters, saying China has been grappling with oversupply after importing a record volume in 2013.

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