There is panic in the global capital markets and it is pervasive. Let us not mince words here: the fight today is not for a few pips in the EUR or a the continuation of the bear market in commodity related currencies, or the implications of the modest 4% devaluation of the Chinese Renminbi two weeks ago, or the debate over when or where the Federal Reserve Bank here in the US shall begin it program of “lift off” regarding the o/n Fed funds rate.
These are all secondary this morning. This morning the fight is for survival; the fight is for the retention of or the getting of liquidity; the fight is simply the fight to stay fiscally alive and well. All other concerns are truly secondary.
Regarding gold, it should be higher under normal circumstances were there only “reasonable” levels of panic in the air, but that is not the case. This panic is palpable, real and extending and the margin clerks around the world have no choice but to pay heed and act accordingly.
In this environment, even gold has lesser value for as a store of liquidity it is being looked upon by the margin clerks with envy of sorts and as a place where liquidity can be gotten. All other concerns are secondary. For the moment, gold serves only as a store of massive liquidity and it is being tapped. It cannot be otherwise.
Note, however, the relative strength of gold compared to silver, or to platinum or to palladium or to copper and the other base metals. This is as it should be in panic, for there is far less “fundamentally” proper in owning these industrial/precious metals than compared to owning gold. Hence even as gold is weakening, silver, platinum, palladium, copper et al are weaker still and shall be until the present panic has run its course.
This article was written by Dennis Gartman.