The whipsaw in gold demonstrates the powerful effects of the distortion created by these two markets.

For investors, I would not suggest gold has no place in your portfolio. Rickards concurs with my thinking that 10% is appropriate for conservative investors and 20% for aggressive investors. If you are a long-term investor, gold is still a reasonable hedge.

"None of the fundamental reasons to own gold as a tool to preserve wealth have changed," says Rickards. "What happened during the week has only made gold like shopping at Walmart. It's a lot cheaper."

However, the rules of the game have changed, and now the only way I can recommend owning gold for investors is in its physical form, in a vault that you can access.

I could lament on what a sad development this is but there's already enough emotion in the markets clouding judgment and creating losses. For smart investors, the best course of action is to reassess and act accordingly.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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