This week's big drop in the gold market slapped us like a jealous mistress. We were sure we needed to do something in return, but we weren't sure what. Is this the end of our fling with gold? Or is it merely the beginning of something even more wonderful? We thought about it and came to a familiar conclusion. To make a long story short: if you wanted to buy some jewelry for your Indian girlfriend, this is probably a good moment to do it. You might want to pick up a few shares of Tata Motor Company, too, but that discussion will have to wait.

There are some things in which we here at The Daily Reckoning, as skeptical and cynical as we are, have an abiding and almost unquestioning faith.

When a politician says he is doing something for our sake, we are sure he is lying. When a central bank issues paper money, we are sure it will one day be near worthless. And when the great mass of investors goes running off in one direction...we are sure it is wise to go in the other.

The "flight from risk" was fully booked early this week; even the wait list was overflowing.

On Tuesday, the Nikkei went down by 4.14 percent with 222 out of a total of 225 stocks lost in the session. India's Sensex index fell by 5.53 percent for the session, bringing it down by almost 30% since the early part of May. Emerging markets have lost all the gains they made in 2006.

Commodities and metals followed the rest of the market sheep to the shearing.

July copper closed down 21.8 cents, or 6.8%, at a little over $3 an ounce. July contracts for silver dropped by $1.44, or 13% touching $9.60 an ounce, a level it hasn't seen since Feb. 23, 2006.

But it was the flight from gold that caught our eye. According to MarketWatch, "Gold futures closed lower Wednesday - failing to hold earlier gains despite weakness in the U.S. dollar, to tally a seven-session loss of more than $82 an ounce." And we also learn from MarketWatch that "Gold has now fallen about 22% from its May peak above $730, pulling other metals with it."

But wait. How can anyone still believe that gold is safer than dollars? Has it not lost $150 in the last three weeks? Is it not lower by more than 20%? What kind of a safe haven it that?

Well, we know we should be delighted. And somewhere remote in our frontal lobe, we suppose we are almost beside ourself with joy. Now, we know can buy more of the stuff for less money, we tell ourself. We would buy some gold bangles for our Indian girlfriend, if we had a girlfriend. And if she was from India. We would get more bangles for the buck.

But we are flesh and blood; yes, we are human, too. At least, we are Irish.

Which means we have poetry in our hearts as well as calculation in our heads. And yesterday, our heart bleated out a refrain of fear along with nearly everyone else's. "What if we're wrong...what if gold just keeps going down, down, down until it finally gets to Hell...or China?"

Then, for once - fortunately - we ignored the poet and turned to the accountant. "Gold is an even better deal today," he informed us, and we came to our senses.

This week's "flight from risk," you see, is crowded with refugees from the Dubai Stock Exchange...with runaways from the Indian stock market, too. They are escapees from copper, and even deserters from gold itself. When gold crashed through $600, it seemed to have de-clenched some automatic program selling, or at least some knee-jerk selling. How else can you describe it? Who but a jerk with weak knees would sell gold at $600 when he deemed it a bargain only a month ago at $700?

But the jerky knees were everywhere. And there were the advisors, the experts, and the pundits...those who were in a fever to buy gold when it was a $100 more expensive. And now, they are in a delirium to drop it. There were the prophets of a new golden age in a panic that the "bubble in gold" had popped.

How do you account for such behavior? Along cometh Matt Stichnoth with what may not be an explanation, but at least it rounds out our
observations:

"In Expert Political Judgment, Philip Tetlock...ran a systematic, multi-year study of forecasts made by political experts, then tallied the results. In particular, from 1987 through 2003 Tetlock asked 284 individuals, all of whom make their living analyzing and pontificating about politics...and added up their scores once the outcomes of the events were known...And what Tetlock found when he was done was the same thing that a regular viewer of those cable shows might already suspect: the forecasts made by political experts often end up being glaringly wrong.

"In fact, Tetlock's work shows that the forecasts of experts aren't much better (and are occasionally worse) than that of mere well-informed amateurs. And in just about every case, on every issue, over every measurable time frame, human prognosticators don't do as well as mechanistic forecasting approaches...when subjects were asked to assign a likelihood to a series of hypothetical future events by rating their chances of happening from zero (impossible) to 1.0 (inevitable), the events that had been rated impossible or virtually impossible (0 or 0.1) by experts ended up happening fully 15% of the time. Sure things or near-sure things failed to occur a whopping 27% of the time. This is hardly the sign of a discerning knowledge of what the future holds.

"In all, it was a mess.

"One area that does show some significance correlation with accuracy, meanwhile, is the frequency of an expert's contact with the media. Unfortunately, that correlation is negative. You read that right: experts that tend to appear regularly on TV tend to make forecasts that are even less accurate, on average, than their camera-shy peers. Someone please call the cable news networks."

And don't forget to tell investors: if they're paying any attention to market forecasters - especially those on TV - they're probably making a big mistake.

Here at The Daily Reckoning, we remind readers, we have no forecast, just faith. We have faith in Ben Bernanke, Hank Paulson, George W. Bush, Jean-Claude Trichet, Mervyn King, and all the great officials and experts of finance. They have unplugged the dikes, the sluices, the floodgates and the taps.

A tide of liquidity - mostly in dollars - has swamped the globe. Since the dollar was cut loose from gold, the great ones have destroyed 80% of its value. They will get the rest of it soon. They will not let us down.

*** These days the one thing that intrigues us as much as gold itself is Goldman Sachs, which is first an investment bank, but today, also the world's biggest and most successful hedge fund. It has profits of 200%, leaving Enron at 100% in the dust. What it does, it must do well, it seems. But what does it do?

Luke Johnson in the Sunday Telegraph has an explanation. He says, "Hedge funds make their managers huge profits, so they can afford to bribe private bankers and others to push their products...Of course, the City [London's answer to Wall Street] loves hedge funds. They deal ferociously and pay big commissions. They only manage a fraction of the total funds invested in U.K. equities, but pay a significant minority of fees.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.