there were several reasons the precious metals and related shares sold off last week, but none of them had anything to do with fundamentals. on thursday, ecb president trichet said european growth was slowing, and the implication was that the ecb might cut rates, or at least not raise them any further.

this led to a weaker euro, which resulted in a stronger us dollar, which in turn led to weaker gold and silver prices. that's the official story, but there's more to it. this comes from james turk's website under the heading "mystery solved"

So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally.

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