Gold is under assault again. The mechanism of how it is done may be the next financial scandal. Some banks or governments are selling a lot of paper contracts for gold they do not have. Others, are borrowing gold from banks that hold gold for customers. The body of evidence is growing, because customers who request gold delivery are stalled untill the holding bank can buy some newly minted gold. Others find that the gold that is returned is not the gold that they had on deposit.
Gold and US Dollars vary reciprocally during times when the markets are flat, such as now. We saw gold correct from Sep 2011 and that correction was finished in May. Indeed, my charts predicted an end to the correction at the end of May. It did not happen. Instead, gold fell into a wedge pattern a little lower. Gold has come under pressure again with the 1,550 support being challenged. So far this level held.
Another factor is the US Dollar Index. In 2008, the Index reached 90 and in 2010 it reached 89. The Dollar Index is on the rise again. Should it reach above 84, it has no resistance till the 89-90 region. Most of this is due to the inept maneuverings of the EU in handling the debt crisis. The Euro has been sinking and people buy Dollars. The FED insists that its policy is to produce low inflation, but it fails in doing so. I believe that the FED is waiting to see if a Republican gets elected in November and then unleash a tide of money now held in deposits in the banks. However, the slow or non-existent recovery of the economy, along with the rising price of the Dollar may force the FED to do it sooner. Anyway, the FED has that as a mechanism to goose the Stock Market, increase inflation and promote export.
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