Until such time as both the FDIC and the Basel III committee officially deem Gold (AMEX:GLD) as a Tier I capital asset days like this will continue even though days like this are fundamentally strong for gold. The effect of the fear trade on gold prices cannot at this point be understated because the banking system is so fragile that any hint of a liquidity squeeze or deterioration of the situation in Europe or the U.S. has banks running from gold into cash and bonds in a rush to maintain capital adequacy ratios, especially heading into a weekend. So, Friday’s non-farm payroll miss by the U.S. was enough to send the markets reeling and gold, after an initial intuitive spike higher, was immediately sold off as capital flew into the waiting arms of the Federal Reserve.
It really is a case of financial Stockholm Syndrome at this point.
Gold closed down not only for the day but for the week, down $18.30 to $1578 per ounce. Since the February 29th massacre in the price gold has not put in two consecutive up weeks and days like today ensure that this is the case. We wouldn’t want anyone to get the idea that gold is worth owning now would we?
The financial system is attempting to come apart at the seams and the only protection against that is sold without a care. Up truly is down.
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