The Fed's attack on Gold may have backfired badly and the unintended consequences may get out of hand very quickly.
Gold 10-Year Chart
Margin selling on Monday, which may continue into Tuesday, tank gold market hard, but it is not just gold that tank. Panic selling spread to many asset classes including stocks and commodities because traders who suffered losses in their gold trade has to sell whatever they own in order to meet their margin call.
Next Support Levels are $1,345 then $1,290, but keep in mind that during a major liquidation selling could slice through support levels without pausing.
Short is still the preferred trade direction until price action indicates otherwise. If the 2008-style market meltdown has been triggered, then gold may tank all the way down to $1,000 before finding support.
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Another unintended consequences of the action of pure academics at the Fed, which they would never foresee, simply because they do not understand real world events, is the credit contraction caused by loss of confidence due to panic selling in gold that spread to other asset classes.
The current stock market bubble that the Fed has carefully engineered over the last several years may have unwittingly been popped. A sell-off in the stock market and the resultant credit contraction that will follow will cause interest rate to spike and the bond market to collapse.
Spiking interest rates and a collapsing bond market and the stock market is a perfect recipe for global financial meltdown. With central banks out of bullets, the meltdown will collapse most western government and their banks.
