Gold has consolidated nicely just under $1400 after a rough week of trading. The earlier half of the week saw gold brought through its entire range and then some, as it retreated under support levels at $1395 and $1385, finally stopping its move lower at $1372. It was moderately volatile today, but traded nicely in its lower range of support. I expect it to come out swinging tomorrow, and rise to $1430. Nothing in the economy has changed and gold knows this. Nothing except the Federal (Private) Reserve no longer prints monie. Just kidding, they do, it says so on the Federal Reserve Notes they issue. Ben lied.
QE 2 policy is not increasing the monie supply, but the monie supply is increasing. What is causing it? M2 is increasing and most likely this is due to banks making performing loans. Most of those loans are extended to large corporations. The corporate global sector is the beneficiary. Main Street, by its local governments and local sectors, is not helped by this extension. M2 will do little for Main Street, much the same way the Bush Tax Cuts will. The Tax Cut extension will once again help the corporations, as the big investors can now decide what to do with their fun bux. The currencies will now be made to invest, and the investments are not in the back yard.
America has experience life for three generations complacent due to its use of the world reserve currency. This brought about a country who could not do much other than drive cars and eat. The dollar was the backbone of this experiment. Without access to the reserve unti, America has nothing but dirt. But let's not be too hard on dirt.
The dollar is waving in the wind like a beat up old flag, and gold is wondering how much longer it can stand the current storm. If for some reason there is a move to the dollar, current trends has gold rising in price in unison. This is because gold is seen as a safe haven currency, as the dollar formally did.