Some are claiming that this is now a once in a 2 million year 'Golden Swan' event which is just a bit rich. Nonetheless, it is dramatic.

But what's it saying? To understand we need know what makes gold go up in the first place. There are various marginal reasons - sovereign instability, inflation, jewellery demand - but one towers above all else, the value and stability of the dominant reserve currency, the US dollar. Here's the money chart:

You will note that despite a neat inverse relationship, gold has no one-to-one relationship with the dollar. That is, gold went up much more than the dollar went down. I argue that is because gold's real relationship is not to the dollar's value itself but the degree of stability or otherwise in the policies that determine that value.

That is, a high degree of instability in US monetary and fiscal policy, especially of the expansionary type, will lead to gold appreciation. It has a one-to-one relationship with chaos in value determining settings not real value itself.

So, the direct conclusion to draw is that gold is falling because the chaos that marked US fiscal and monetary policy since the GFC is ebbing. And that is the case with the US budget coming slowly under control and, in a world of mad central bankers, monetary policy suddenly seeming much less radical than it did.