Lehman Five Years On: Gold Still Safe Haven As Financial System ‘Insane’
Gold has fallen 5.4% this week and is headed to its lowest in five weeks (see chart below). A heavy burst of selling led to another sharp fall in gold from $1,323/oz to $1,312/oz, again in less liquid Asian markets overnight and gold broke through support at $1,320/oz and may now test support at the $1,275/oz level.
The losses appear to be primarily due to speculative paper selling of futures contracts leading to further technical selling as stop loss orders are triggered. There has been no marked decrease in global physical bullion demand or significant physical selling of any note in recent days.
Speculation that the U.S. Federal Reserve will decrease its stimulus next week and the lessening of the threat of U.S. military strikes on Syria may have contributed to the price falls as nervous speculators take profits or go short.
Lehman Brothers filed for bankruptcy at 0145 EST late Monday night, September 15, 2008, and the five year anniversary is this Sunday.
Little has changed in the financial world and on Wall Street since the collapse and vital lessons have not been learnt. The financial system remains vulnerable to excessive risk taking, unforeseen shocks and systemic risk.
It is important to note how the Lehman bankruptcy and subsequent systemic, financial and economic crises showed gold’s importance as a safe haven asset and as financial insurance in a portfolio.