Last weeks technical indicators saw gold continuing in a downturn in the short term but returning to the upward trend in the longer term.

Now the short term technicals are pointing positively for the yellow metal as the downtrend has reversed from its earlier drop down to the circa $655 level.

At the same time the European Central Bank has suspended gold sales until September but still clouding the issue is whether the sales by the Spanish Central Bank is continuing.

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In 1971 the US would no longer honor its debt in gold thus giving it a license to print money and, naturally, other countries followed suit.

Result, easy borrowing to boost the economy followed by galloping inflation.

Gold went to over $800 an oz., shares, bonds stock indexes, house prices bombed as trust in paper money collapsed

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The question mark hanging over the worlds markets grows bigger every day that the leading indices move onward and upward into the high ground.

For centuries economic booms have been followed by a corresponding downturn, the higher the peaks, the lower the troughs, the longer the up cycle the longer the down cycle.

In modern times the cycles have more or less followed a five year pattern but this time the bulls have had a good eight year run.

For at least the last twelve months there has been an increasing number of factors in the US economy giving rise for concern, from housing busts to excessive personal debt, from ever increasing US national debt to a diminishing manufacturing capacity, escalating cost of overseas military involvements with the hope of successful outcomes receding by the day.

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Has investor complacency at last been shattered or are the optimists just taking a breather?

Either way gold, which has very nearly tripled in price since its 1999 low, has come under pressure.

While investors and speculators alike have seen considerable profits in decent stocks, property and commodities every year since the turn of the millennium the last two weeks has undermined the (irrational as some would say) confidence in a continuing bull market in stocks and an increasing awareness that the worst is probably yet to come in the US property market.

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 Keep the Faith!

This last week has been for many of us a long overdue stock market correction and possibly a forewarning of the dawn of a long-term bear market.

Despite the earlier turmoil the signs so far this week seem to indicate that investor confidence has not been irreversibly undermined and that there is a good chance that ´normal service´ is being resumed.

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After a long period of, for want of a better word, inertia in the volatility of the US and other Western stock markets, this week (W/E 2^nd March) has seen the bucking of the ever upward trend and a return to uncertainty illustrated by the increase in volatility.

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The demand for gold has been outstripping annual production for a considerable time.

With realistic forecasts of a substantial and sustained growth in demand and little prospect of any worthwhile increase in production we investors would be forgiven for believing that gold is a raging bull market and jumping in with both feet.

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Supply

Gold is unlike most other commodities in that practically all the gold ever mined still exists mainly in the form of jewelry, coins or bullion.

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