The bull market that wouldn't end finally has. In a brutal day that just kept
getting worse, US stocks followed Asia and Europe into the deflationary vortex.
Whether this was just a speed bump on the road to infinite financial asset
valuations or the return of sanity to a previously-insane world remains to
be seen. But one thing that has the ring of certainty -- in the sense that
it repeats a pattern in place for as long as there's been human civilization
-- is the behavior of gold. While equities -- at today's levels a perfect example
of hope triumphing over experience -- were being crushed, and even the lesser
precious metals were under pressure, gold had a nice, calm, in all respects
normal day.
It behaved, in short, like exactly the kind of port-in-a-storm that its fans
claim it to be. Already this year it's up dramatically against a long list
of national currencies. The chart below is the Brazilian real price, which
is par for the emerging market course.
Does this mean we're back in 2009, ready for another epic precious metals
run? Who knows? Much, as always, depends on the shape of the central bank response
to this week's equity meltdown. And the deflationary forces that are engulfing
much of the world could be temporary bad news for an asset that many still
see mostly as an inflation hedge. But each new instance of gold shielding its
owners from crisis adds credence to the claim that it is sound money which
holds its value while make-believe financial assets are getting whacked.
