Gold blow off takes the froth out of the market

As Gold seems certain to log its third (of a possible three) weekly drops of 2011, bullion detractors would have us believe that the Gold bubble has popped. Apparently this would mean all the reasons for buying gold have now gone. Problems of currency debasement, massive deficits, sovereign debt burdens and geo political risk are all now solved. So we can all relax, economic prosperity is assured. Hmmmmmm

If in fact, given that the only certainty is that all the problems that were attributed to Gold's rise over the last decade are not solved, financial media struggled to find the reason for the fall on Thursday. Reasons put forward in the press ranged from Chinese tightening, to improved US data, to the frankly ridiculous rise in Brazilian interest rates. Many observers of Gold over this cyclical bull run will simply put this latest correction down to just one of those things. With gold down just 6% from its peak, it can barely be regarded as a correction, let alone the turn of the trend.

Yet somehow sentiment seems to be trading below the Gold price, with even some of Gold's most fervent supporters seeming depressed. As Mark Hulbert of MoneyWeek said "That's not the behaviour you'd expect if this was the end of the bull run " - "This quick run for the exits is not typical of the stubbornly-held bullishness that… is a hallmark of major market tops."

Fixed price Gold premiums showed a significant rise on Friday as sellers have not yet repriced inventories against a lower metal price with 1 oz Gold Bars in the United States asking a 22% premium over the Gold Price