Rumours about European banks were the catalyst. Two Italian banks, Unicredit, the largest bank in Italy and Intesa bank were both insolvent. Another bank (now known to be Swiss National Bank) went to the ECB for a handout to the tune of 500 million dollars as it could not get funding anywhere.
Whispers that a banking holiday in Europe was close at hand set the global marketss on a free for all slide.
The DOW after being down by over 500 points rallied late in the day to be down only 419 points or 3.68%.
The Nasdaq was down 131 points or 5.22%. The German Dax was down 346 or 5.8%. The FTSE was down 139 points or 4.74%. The French CAC was down 178 points or 5.48%.
And while it may be European Banks as the current concern, it comes on the heels of the US debt crisis.
Recall that it was almost two years ago (November 19th, 2010 to be exact) when this blog commented that, "the current move to gold around the world is a hedge against the mismanagement of the state - which at this time and place is the United States with it's world's reserve currency status... we are currently witnessing perhaps the most profound paradigm shift in gold from the patterns seen over the last 20 years. During that time European monetary authorities sold the precious metal and Asian central banks accumulated official reserves in the form of US Treasuries."
Just after midnight this morning (when this post was written) Gold was at $1,857 per ounce.
- LONDON (Dow Jones)–Central banks are topping up their gold reserves, quadrupling their total purchases from the market in the last quarter as they seek to reduce their dependence on traditional reserve currencies such as the U.S. dollar.
Even with gold prices at record highs, emerging markets’ central banks have revived the official sector’s gold-buying interest. They are diversifying their foreign exchange reserves, which have grown along with their export industries. More recently, they’ve also bought gold in reaction to the persistent sovereign-debt crises affecting traditional reserve currencies, like the dollar and the euro. Analysts say this trend is likely to continue.
"We expect to see additional demand support from official-sector purchases as numerous influential countries are becoming bearish on the status of the U.S. dollar as a reserve currency," said analysts at Swiss bank Credit Suisse.
Central banks bought 69.4 metric tons of gold in the second quarter, more than four times the 14.1 tons reported a year earlier, the World Gold Council said Thursday.
During the first half of the year, central bank gold purchases totaled 192.3 tons, more than 2 1/2 times the 72.9 tons bought in the first six months of 2010, the council said.
But make no mistake... it will continue to be a wild roller coaster ride involving wild swings.
Expectations are for a significant raid on the paper markets at about 8:00am PST today as this is the Friday before COMEX options expiry and those days the metals are usually targeted for a big hit.
Learn to love these type of days... the metals are on sale when it happens.
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