RE: RE: Gold Down BigWe are at an interesting point right now in the gold analysis. Essentially, there are a number of variables in play which are going to impact the value of gold over the next 4-6 months. The rapid decline in the value of gold this week is, i think, attributed to the market pricing in the strong possibility of a recession and the virtual certainty that the Fed is not going to undertake a third round of QE. Essentially this is causing a number of forces to press down on the price of gold. As mentioned in some of the posts margin selling which is being covered off by gold profits is certainly on of the factors contributing to the price decline, as I am sure, is profit taking.
However, if you look at it, what is really going on is that a move is being made to greenbacks. The strength of the greenback in turn drives a devaluation of gold, as gold is priced in USD. So if the dollar goes up a few % than gold theoretically drops in value correspondingly. If you look at the 07/08 recession gold took the same nosedive from just over $1000 down to around $700 before it began ticking back up again when QE and gov't stimulus were announced.
It is my belief that if we have a positive growth surprise this fall, or a third round of QE we are going to see gold shoot up again. If that does not happen and particularly if we fall into a second recession, it may drop 30% again before it consolidates and pushes forward.
This being said, given the economic shape our world markets are in i can't imagine gold not being higher 2 years down the road than it is now