Gold had been frolicking above $1,900 on subdued holiday trade, and was seen to be supported by the latest turmoil in the euro zone. The sovereign debt crisis is running amok, government bonds for a number of nations are continuing to fall (most noticeable is Italy in which it has seen a fall for the last 11 days).
But, as is the case after any major holiday (U.S. Labor Day yesterday), profit taking rubs some of the shine of the gold price. Having nearly a $60 dollar fall at the start of European trading could, in part, be taken as a simple correction.
What also seems to be going on is the fact that the gold market as a whole, has a set value (as in you can add all the gold up that has ever been produced and work out the total). If estimates are correct, there has been around 158,000 tonnes of gold produced so far (or 5,079,817,925 troy oz). At today's price this would give you a nice big total of $9,651,654,129,320 (just over nine and a half trillion dollars).
Now if you compare this to the current US debt of $14,715,060,463,781 (just over $14.5 trillion), you can't help to notice how small the gold market really is, compared to just one debt figure.
As more and more people keep turning to gold as a safe haven, and the price continues to rise, we will continue to see more large spikes and corrections in the price. What normally would have been a nice and steady $10 correction is now a fast and rampant $60 fall (and sudden gain), and the problem is that both of these scenarios happen on the same stimuli (in this case profit taking and safe haven appeal).
One can only hope that gold can float like a butterfly and sting like a bee, and not the other way around.
Ross Norman is the owner and chief executive officer of the London-based gold broker Sharps Pixley Ltd.