This is no storm in a teacup. The desert storm racking the Persian Gulf emirate of Dubai has reverberated across the globe. And the charge of the gold bull has clearly been stopped in its tracks.
On Monday, Dubai stocks sank in their first day of trading since the United Arab Emirates called for a delay in repaying billions of dollars in debt.
Last Wednesday afternoon, the authorities in Dubai had told the world that they would be defaulting on some $60 billion of debt. And by Friday, the day's trading see-sawed more than $60, with gold closing $42 above its intraday lows and down just under $13 from the all-time highs it had set in US trading on November 25.
One London trader said: Dubai is weighing heavily on the (European) market, it has its fingers in so many pies that it could have a contagion effect and there are concerns another country could have problems on the back of this.
He added that the scenario was very similar to when Lehman Brothers collapsed, warning that Dubai's problems could be the catalyst for the market to fall further.
In New York on Friday, gold fell. Gold futures for February delivery dropped 1.1 per cent to US$ 1,175.50 an ounce on the New York Mercantile Exchange.
Clearly, just another whiff of a global credit crisis has got global investors quickly stampeding for the exits.
In November, gold prices have rocketed to record heights close to US$ 1,200 an ounce as a perfect storm of market conditions has propelled demand for the precious metal, analysts told AFP.
Gold, whose two main drivers are jewellery and investment buyers, surged by around 50 per cent in value over the past 12 months, gaining about 14 per cent in November alone.
The latest record was created after the International Monetary Fund (IMF) announced Wednesday it had sold 10 tonnes of gold to Sri Lanka's central bank for US$ 375 million as part of a restructuring of its financial resources.
Later the same day, the shock news from Dubai rattled world financial markets, pulling down the price of the yellow metal.
The city of gold had lost most of its lustre.
Bowing to the strong headwinds blowing their way, commodities prices slumped on Monday, with rattled investors spurring a dollar rally.
Spot silver prices sank to $18.30 per ounce. NYMEX crude oil prices fell to $72.39 before paring losses. COMEX copper futures fell to $3.1255 per pound. Nickel, zinc, tin and lead declined on the London Metal Exchange, according to a Bloomberg report.
Though Abu Dhabi, the capital of the United Arab Emirates, has signalled it will provide 'selective' support for neighbouring emirate Dubai, the case-by-case approach might not mean that all the debts will be undewritten.
The writing was on the wall for some time - new figures for the third quarter from the World Gold Council had revealed a 39 per cent slump in demand for gold for jewelry in the UAE, of which Dubai is the commercial capital.
Demand for gold for investment dropped by an even bigger 52 per cent.
Not just for the yellow metal, the region has also been reeling under its worst property crash ever and lower spending by fewer tourists.
Following the announcement, the storm picked up pace across the globe. Almost £44 billion was wiped off London's biggest companies by Thursday, amidst fears that the UK financial sector could be heavily exposed to the Dubai issue.
It was no different on Monday.
Asian indexes were battered Friday, and the US stock market was clobbered.
In India, gold futures sank on Monday. The Dubai debt crisis is still persisting and is having a negative impact on gold prices, with profit-booking seen earlier today, said Aurobindo Prasad of Karvy Comtrade.
On Monday, the US stock market futures hovered around the flat line before the bell, as investors continue to watch for news related to Dubai's debt situation.
The wave of fear has clearly spread. The Dow Jones Industrial Average lost 1.5 per cent, the Standard & Poor's 500 Index, and the Nasdaq Composite Index lost 1.7 per cent, the Russell 2000 lost 2.5 per cent.
Only way down
Something has got to give, and since the markets are driven largely by sentiment and perception, gold price is soon set to run out of steam.
Remember, the rally has been exacerbated by dollar weakness. And the dollar index is at 15-month lows.
The lack of confidence that investors have regarding the major currencies - especially the US dollar, has helped raise the gold price.
The market has clearly been whipped around by news on the Dubai fallout.
The dollar index, a gauge of the greenback's performance against six other major currencies, fell 0.6 per cent from late US trade on Friday to 74.533, after climbing as much as 1 per cent that day and above a 15-month low of 74.170 last week. It fell against other major currencies on Monday.
Clearly, this portends the end of the gold boom, with the economic depression set to cast its long shadow over the bouyant gold market. For many, it is a clear signal that the potential second down-leg in the world economy is here. Alive and kicking.