NEW YORK (TheStreet) -- If you want to understand the recent fundamental and technical catalysts that have sent gold prices crashing you need to read my article entitled Gold Is Entering Its Liquidation Phase. However, if you want to understand the deeper underlying cause of this ongoing crash in gold prices, continue reading here.
The FrameworkEconomists that follow the so-called "Austrian School" of economics are fond of saying that the causes of a crash in asset prices are to be found not in the indicators that are coincident to the crash (as those are mere symptoms and not root causes). The root cause of a crash in asset prices is actually to be found in the factors that led to the exorbitant rise in asset prices that preceded it. And while many analysts of the Austrian persuasion may not necessarily feel all warm and fuzzy having their own well-worn analytical insight applied to the yellow metal they tend to be so fond of, it probably provides the best general conceptual framework for understanding what is happening right now in the gold market.
The root cause of the current ongoing crash in gold prices is to be found in the factors that led to the exorbitant rise in gold prices that preceded the crash.