ZERVOS: Now We Know What Last Week's Gold Crash Was About — And It's Good News
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Last week was an interesting one for commodities, especially gold.
Gold crashed, having its worst two-day period in three decades. Other commodities plunged hard, and stocks were wobbly.
Suddenly everyone started screaming the same thing: Deflation!
This week has seen things calm down quite a bit, and because of that, David Zervos of Jefferies says there are some lessons we can learn from the gold crash. Specifically, we see now that the gold crash was just about hyperinflationists getting carted off, and not about deflation.
So the verdict is in. Gold is settling down 8 to 10 percent from its pre-crash levels and the world feels mighty fine. Spoos are a few ticks from record highs and the Nikkei is moeteimasu!! So much for the endless stream of comments suggesting that because of a Gold crash all leverage will be purged from the system. Yes gold collapsed. And since 2010, Gold has consistently traded above spoos, sometimes by hundreds of points. But this is a crash back to reality - a cathartic move that is importantly NOT a sign of global deflationary Armageddon. Its a sign that a bunch of misguided hyperinflation focused investors were carted out. FINALLY!
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