It’s not supposed to happen: there was US consumer price inflation hitting a 17 year high overnight of 5.6%, up from 5.1% in June and what does gold do? —  go and plunge below $US800 an ounce in Asian trading, after a $US12 an ounce fall in US and European trading.

Silver also plunged, falling more than 12% as speculators liquidated long positions to avoid being caught.

And the oil price fell more than $US1 a barrel in Asia this morning to trade just under $US114 a barrel.

Gold is supposed to be at its most attractive when times are miserable, inflation is running hot, there’s fighting in the streets (as we have seen in Georgia), and yet it’s a damp squib: all those claims from gold bulls about it being a ‘hedge’ against inflation and a hedge for hard times, are just poppycock.

Gold for immediate delivery fell as much as $US17.15 to $7US89.47 an ounce, a 2.1% fall from yesterday in New York and the lowest since December 17.

The metal traded at $US801.40 at midday, down $US13.10 an ounce.

Silver plunged 12.1% to $US12.46 an ounce, the lowest since last September, before trading at $US12.98.

The size and speed of these falls will be hurting some traders who would not have been able to quit positions.