Commodities were weak overnight on poor Chinese gross domestic product data, which have accelerated concerns over a slower global outlook. Oil is down 2.2 percent, copper is down 3.3 percent, and gold is down 6.3 percent.
China's first-quarter GDP came in at 7.7 percent, below expectations for an 8 percent gain and weaker than the fourth quarter's 7.9 percent gain.
What's up with gold? Deflationary Chinese numbers didn't help last week, Goldman's "sell" recommendation did not help either, but the straw that broke the camel's back was fears that European central banks might also be sellers, similar to Cyprus.
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This current panic is forced liquidation ... margin calls ... remember, for COMEX you could have margins as low as 5 percent, so these commodity houses are certainly liquidating.
I would not be surprised to see margins raised on gold and other commodities, likely today.
What's next for gold? Here's the problem: The physical guys—as well as the Chinese and the Indians—have been buying gold for a long time and they are now sellers.
Who are the natural buyers for gold now? It used to be exchange-traded funds, but that's unlikely now.
This is the problem when everyone is long—everyone is trying to get out at once.
But there is now blood in the street. This washout in precious metals, at some point, will be a value opportunity. Someone is going to buy, whether it is at $1.300, or $1,200, I don't know.
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And what about that fear European central banks might be sellers? It seems unlikely, but not impossible.
Cyprus is a very special case. The decision on the sale of gold rests with the Cyprus Central Bank, it still has not made that decision.
Its central bank is independent from the government. Over the weekend, European Central Bank President Mario Draghi said the gold would be used to fund losses that the central bank had taken on board.
As for other central banks selling gold, they cannot sell gold to finance their governments. That is forbidden under the European Union treaty. They could, however, use it for the same purposes that Cyprus might use it for: to fund losses that the central bank had taken on.
Even here, however, sales are limited. There is a central bank gold agreement that limits how much gold can be sold by central banks on a yearly basis.
Who would Cyprus sell its gold to? Don't be surprised if you get a private placement ... that Cyprus gold could end up in another central bank. A couple years ago, the International Monetary Fund sold about 400 tons of gold ... about half that amount ended up in central banks of several emerging market countries, including India.
Finally, I've been asked this morning about the relationship between the gold ETFs and gold prices. Is it possible for the relationship between a gold ETF and spot gold to get a bit out of whack? Sure it is, for a short period, but that's what gold arbitrageurs do. If, for example, the SPDR Gold Shares Trust gets cheap enough, gold arbitrageurs will buy GLD and sell London gold, or sell COMEX gold. And they will make money at it.
What about stocks? Commodity stocks have already been hit on global slowdown concerns.
The game today is to figure out if the commodity decline will affect the broader market. I can't imagine it won't, since this is about slower global growth.
The earlier indications are encouraging. Defensive names are holding up, but so are most banks, with Citigroup up 2 percent on better-than-expected earnings. All of the other big banks are up, as well.
—By CNBC's Bob Pisani