One would expect that the value of outstanding derivatives would have declined more or less by that amount. Stranger still, the producers did very little hedging the fourth quarter. The flood of new paper appears to have played a role in snuffing out the short squeeze that began with the announcement of the Washington Agreement. This rally caused extreme discomfort among the bullion dealers. This is now a disorderly market, said Andy Smith of Mitsui, one of the most respected gold analysts.
Gold is still a reserve asset.
If you had conditions like this in the bond or foreign exchange markets, it would not be allowed to continue. Over the last three days, gold has been trading like a commodity, not like money. The situation is untenable. Mr. Smith called for the European banks to urgently review their strategy. Andy Smith was and continues to be a leading spokesman for the bearish view and for the bullion trade.