That gold is down in the face of this mess is probably a good indication of the massive leverage still in play. Fundamentally gold should be soaring. However, the unwinding of leverage is forcing good assets to be sold with the bad.
Six sigma events are happening daily now (or appear to be). The reality is there was an upfront huge mis-pricing of the risk that such events could occur. This is what happens when fractional reserve lending allows financial institutions to leverage 30-1 or greater, the Fed fuels the fire with low interest rates, and the Fed praises derivatives even though derivatives usage is many multiple times greater than the entire world's economy.
Mish Shedlock, 9.16.08