What will drive the gold price?

A post on Seeking Alpha states that improving economic statistics will continue to drive gold and silver prices down. Larry Edelson claims that financial pandemonium centered in Europe (and the crash of bonds) will drive gold prices up.

Italian and Spanish banks are once again under pressure and the meetings called to shore them up have produced little so far. Tomorrow's meeting in Brussels may decide to implement the Cyprus model of confiscating large deposits (above 100,000 Euros).

Economic recovery is not going well either. The US growth in QII has been revised from 2.5% to 1.8%. We are told that the second half of the year will be better. China has tightened its lending and economies that are linked to Chines growth (i.e. Australia, Brazil) are sputtering. In addition, China may have to do its own QE to increase liquidity. The US economy is now dependent on injections of cash and profit comes from laying off workers. This is not a model for growth.

Meanwhile, the bond market is heading for a crash and gold is being suppressed by constant shorting in the paper market. The last episode of shorting (i.e. before the current one) resulted in a drop of $60/oz and no trade of actual metal. No figures on the current drop yet.

Once again, deflation rears its head.