"Gold is sharply, sharply weaker, amidst rampant gold bullishness in the past two or three weeks. We have seen people who had never bought gold before in history buying gold… what we shall call “insurance” gold… to hedge against inflation in manners we’ve not seen before in many, many years. We’ve actually had inquiries from the public in how to buy very small sums of gold… 1/10th ounces and the like… a few hundreds of dollars worth of gold… to protect themselves against the eventual ravages of the Obama Administration’s spending programs. When the public wants in in this manner, ‘tis wise for us to head to the sidelines and watch. That is precisely what we are doing at the moment.

GATA’s folks made much of the fact that we said last week that “someone or something” had put a limit to gold’s rise at the $980 level. We wish to be clear about this: we do not for a moment believe that there was governmental action taken to sell gold and keep it from rallying, for we do not for a moment believe that the government cares much either way where gold prices move. We do. GATA does. Wall Street does, but does Washington, other than using the price of gold as another barometre of economic activity amongst its many others? We think not.

Where then can spot gold fall? The Box, marking the 50-62% retracement of the bull run from $880 to $990 gives us a range between $935 and $922 and we are there now. For the gold market bulls, this must hold. We are considering buying gold on this weakness, but discretion is to us the better part of valor and we’ll stand aside, watching… from the sidelines, allowing others wise or more foolhardy than we to take positions. If those positions hold and do well, we can join the fray later this week."

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