Gold. Its the talk of the town right now and for good reason. Since last
Friday, the precious yellow has plunged more than $140 an ounce, or about 8%.
Whats Midas trying to tell us? Gold haters will no doubt say, Its just another
bubble bursting. Good riddance. But I wouldnt be so quick to draw that
conclusion. Yes, the price of gold has climbed much faster than other goods and
services over the past 10 years and certainly could be viewed as expensive now.
However, the recklessness of the worlds fiscal and monetary authorities over the
same period is also unprecedented. Thus, its reasonable to suppose that golds
value as insurance (against further mismanagement by policymakers) has increased
exponentially. Why, then, has bullion plummeted in recent days? Some of the
selling might trace back to technical causes: profit-taking by John Paulson and
other hedgies, stop-loss orders previously entered by short-term traders, etc. I
suspect, though, that another factor is probably at work. We know European banks
are under heavy pressure to raise cash.
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