“Gold has been caught up in commodity liquidation after poor data and as equities (fall),” said Simon Weeks, head of precious metals at the Bank of Nova Scotia.
“Usual story — selling first as people need cash… and then further down the road, the gold as a currency demand will kick in.” (Source: Reuters)
I’ve said before that it is normal course for gold to fall anywhere up to 20% in a crisis – especially in USD terms. This is because 1) the USD is appreciating and 2) it is easy to liquidate to cover margin calls.
However, once the initial sell-off is finished gold tends to rise precipitously.
Refer to the June edition of Land, Labor & Capital for details and an example.
