Given the failure in gold prices since last week's highs, in the face of the severe threat against the global economy, it is clear that the gold market has assumed the position of a classic physical commodity facing a drop in industrial and jewelry demand.

In the short term reduced face to face interaction/slowing industrial activity in China and Indian in particular, is likely to crater gold demand with those two countries responsible for nearly 1,000 tons of gold consumption per year!

In fact, given that gold posted a record net spec and fund long positioning in the last COT report, the market should expect to see a cascade of stop-loss selling, especially with the market this morning failing to hold a quasi-double low on the charts at $1626.60. The last COT positioning report in gold posted a new all-time record long of 421,664 contracts and therefore further chart failures should facilitate more stop active loss selling waves and a possible washout quickly back to $1,600.

In short, the gold bugs must be beside themselves with gold's performance over the last 5 trading sessions with the market simply shrugging off what should be considered the biggest economic uncertainty since the subprime debacle.

One could suggest that the current situation is worse than the subprime crisis, as the world is facing a major "slowdown" in economic activity and is seeing the potential for an explosion in global debt levels and sever financial carnage.

In yet another psychological negative for gold prices, Gold ETFs liquidated 82,299 ounces of gold yesterday and that suggests small investors have finally balked after 25 days of purchases.

Surprisingly silver ETF's adding 1.34 million ounces yesterday.

We invite you to subscribe to receive our more comprehensive market update delivered directly to your inbox.


Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Financial Services LLC, unless otherwise expressly noted.