It was the steepest two-day decline in gold prices in 33 years, a 13 percent fall in two days of trading. After years of surging value, of investors hedging against inflation, there was a sudden sell-off that might have been a reaction to... well, to inflation not actually increasing. Over at Business Insider, Walter Hickey looked at Ron Paul's portfolio and estimated that America's best-known goldbug was "personally losing a fortune."
On Wednesday I joined the Paul movement for the launch of the Ron Paul Institute for Peace and Prosperity, at the Republicans' Capitol Hill Club, right near the House offices formerly used by the congressman's staff. I asked Paul: What was behind the gold tumble? Was he worried?
"That's a market phenomenon," Paul said. "That's not unusual. It reminded me of shortly after gold was legalized, in 1975, summer of 1976, gold went from $35 up to $200! Now, $200 was really radical. From there it lost 50 percent. Markets are like that. They're erratic. But I don't see the price of gold as the issue as much as the value of the dollar. The value of the dollar is a subjective thing, it comes and goes, and there are a thousand different reasons why the values go up and down. There's nothing unusual about that market."
One unusual thing, maybe: "There's only one thing I someday hope I can find out. There were 53,000 contracts of gold sold immediately, in one sweep, the day that gold really crashed. Fifty-three thousand is huge, because the gold market is very small. Let's say we're a Chinese bank. We want to dump our treasuries and our dollars; we have $2 billion. You don't dump 'em in one day, because you lose your investment. The person who was getting rid of 53,000 contracts, why would they do that? If they wanted to just wean themselves off, they would have done it slowly."
Paul was going to hold his portfolio, unworried about a repeat. "It was an abnormal market phenomenon, but obviously the weak holders had to get out, and the strong holders are back and buying."