Gold has made idiots of the Swiss, French, Dutch, Portuguese and British central bankers, who sold off 2,671 tons of their holdings at low prices between 2000 and 2009. And of mainstream fund managers who have shunned the asset for decades, misquoting economist John

Maynard Keynes as dismissing it as "a barbarous relic" (he was writing in 1924 about the gold standard, not about gold itself).

Now the yellow metal has made an idiot of the world's most successful investor, Warren Buffett, who has written an article for Fortune condemning it as a "sterile" asset, when compared to productive ones such as businesses, farms or real estate.

In inflationary times those assets should have the ability "to deliver output that will retain its purchasing power value while requiring a minimum of new capital investment," he says.

Whether the currency "a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labour for a Coca-Cola or some See's peanut brittle."

Examine the logic…

Does it make sense to invest in any asset on the assumption that it is a permanent lock-up? Coca-Cola is a fine company, but would it be realistic to hold it for ever, remembering that only two of the 30 firms in the Dow Jones Industrial Average in 1900 survived the century?

David Fuller's view Don't miss the rest of this section because it is one of the best summaries on gold that I have seen. Martin Spring also has a very informative feature on Indonesia. He even includes some comments on "Climate Change Dogma" before returning to investment topics.

What caused the sharp declines in gold and silver yesterday?

I was away yesterday but heard that the selling started when Ben Bernanke did not mention more QE. Well… that may have given it a small nudge but nothing more in my view.

Attribution of cause is always easier in hindsight but gold (weekly & daily) had rallied back up towards its November high, from which it then fell back to retest its September low. Its high-beta proxy silver (weekly & daily) had seen an even better rally in pushing above its late-October and early-November highs. Percentage gains since the December lows were significant in an environment where leveraged traders are likely to have a big influence on short-term moves. My guess is that a number of tight stops were triggered, leading to yesterday's self-feeding rout.

The setback did some short-term technical damage in what has been a choppy and therefore less predictable corrective phase for a number of months, following last year's accelerated (Type-1 as taught at The Chart Seminar) peaks. Despite this, we maintain that there is little technical evidence that the secular bull market which commenced in 2001 is ending or over. Both gold and silver are currently above their 200-day MAs which have turned upwards once again. That is a favourable sign but with both of these monetary metals currently trading like risk assets, I would expect more volatility. This favours a buy-low-sell-high strategy if you are trading, and we would also prefer to buy on setbacks if investing in these assets.

(See also Eoin's comments yesterday.)