Furthermore, without a gold standard, this precious metal has limited strategic use for these central banks. Because gold does not earn any investment interest, some central banks - like that of Canada during 1980-2003 - have already eliminated their gold stock. The potential for gold supply to dwarf its demand poses a hindrance to the metal's potential return well into the future.

Furthermore....heh,

"Because gold does not earn any investment interest, some central banks" took to leasing their gold to traders who then sold it to buy treasuries thus profiting from the spread between the gold lease rate and the rate on treasuries, and (if they were smart) hedging their exposure in the options market. (hey, I like this blue text)

Furthermore... (hey, where'd the blue text go?) we can induce from the above, that Central Banks have little interest in selling their gold or they wouldn't have supported a trade that tends to lower the market price of same.

In the face of historically low rates in treasuries, that trade now appears to be unwinding. In effect, gold is being bought to cover these loans and wind up the trades.

So.... what happens when this process completes? Who is the next buyer of gold to replace carry trade buybacks? Also, <conspiratorial aside> has this trade been facilitated by non-carry trade shorting in the gold market? If so, by who?

This is just me thinking out loud. I don't have a really strong argument, just an intuitive sense that gold wants to head south and retest the long term trend line, which I believe will hold. That could occur with a sharp drop to 550, a slow decline to 650ish, or by simply moving sideways for the next five years. There's nothing in the technical picture that rules out any of these possibilities.

My argument gets further support from the fact that gold hasn't taken the anticipated moonshot in the face of the worst global credit/currency crisis since the 30's. So, what's everyone waiting for? I thought the markets were forward looking?

Here's someone else with a bear case for gold:

http://www.financialsense.com/Market...

I'm not really bearish though, since I think the long term trend will hold. I'm just not bullish on the near term price.

Thoughts and flames welcome,

ebear