Gold and silver rose yesterday (the first day in three) after the worse than expected US GDP report saw the dollar fall in value. Gold fell after the Federal Reserve released its optimistic note but recovered almost immediately.

Gold subsequently traded sideways in Asia and early trading in Europe prior to another bout of furious selling just after 1000 GMT this morning which again saw gold fall a very sharp $10 in a matter of minutes despite the lack of any market or economic news of great significance. Despite these peculiar sell offs, gold remains well supported at $865/oz and the technicals and the fundamentals remain sound.

The WHO warning of an “imminent” worldwide swine flu pandemic is being greeted somewhat complacently by the markets and risk appetite remains strong. This could change very quickly as markets realise the likely dire economic implications of a swine flu pandemic on an already fragile global economy.

The yield on the benchmark 10-year Treasury bond has edged up above the 3% level despite the quantitative easing measures seen recently and policy makers may soon feel the wrath of the US’ creditors and the bond market vigilantes who have remained strangely quiet despite massive monetisation of debt and currency debasement. Long term borrowing costs may have to rise to incentivise holders of government debt and yet the US and other economies are not in a position to weather higher long term interest rates in these very difficult economic times.