Obviously, at the end of the day, the price of gold in USD will rise if the USD falls. The recent data showing lower non-farm productivity vs. higher unit labor costs is just another in a string of data pointing towards STAGFLATION. This has been discussed here at length in the past. Stagflation is dollar bearish, as is deflation. They both lower tax revenue and hurt the dollar. Deflation, at the end of the day, will not hurt gold, it will create a rising gold price. Has in the past, will in the future, IMHO.

thanks

oratier, you still owe me a beer ;-)

Short term viewpoint. Gold completed its bearish wedge pattern around 8/12 with next support at the 601-602 level. If it fails at this level, the next support is around 575. With oil falling, upside risk looks greater than downside at this juncture. It might be prudent to see if it can make a stand at this level before jumping in.

If I understand g034 correctly, both stagflation and deflation are bullish for gold prices. If inflation is also bullish for gold prices, then under what set of economic circumstances would gold prices fall?
I may well be missing something, but this seems like a 'can't lose' proposition, which always makes me nervous.

Gold down, but IVN still going up, again high volume on TSE.

1982 - 2000, gold fell due to disinflation. Paul V. jacked rates up to insane levels to kill inflation, rates dropped and stock/bond markets rallied ending the gold bull as money flowed into stocks/bonds (other reasons as well, end of cold war, technology innovations etc.). Like I continue to say, there is a season for everything, now it is hard assets. One day it will be tech again. I seriously doubt that we will see massive deflation due to the new T2007 Turbo-Charged Printing Press (aka "the Bernie"). Massive deflation would mean depression.

Gold prices will fall when money flows into other investments due to their attractiveness OR when the government stops spending more than they take in (fat chance) OR the Fed pulls a Voelker by raising rates to the point of outpacing inflation (killing the housing market, stock market, bond market etc. fat chance).

Yesterday - http://www.bloomberg.com/apps/news?pid=20601103&sid=aTb.CFJR4zJI&refer=news

``With inflation too high, policy must have a bias toward further firming,'' Yellen said in today's speech. `` - San Francisco Federal Reserve Bank President Janet Yellen

Could this have led to the $usd rise and gold fall? Probably.

This is how the gold market has been working for a few years now: gold price rises and is on CNBC, mom and pop traders buy into at top, Bullion Banks load up on the short side as RSI's reach Bill's distribution zone, buying runs out of steam, "news" comes out dollar positive, Bullion Banks smack gold lower on "news", RSI cycle continues lower to Bill's accumulation zone, Black Box hedgies short gold due to it's new downtrend, mom and pop get scared and sell on the weakness (losing money), Bullion Banks buy back shorts (making money) and let the small hedgies continue to short in the accumulation zone, Bullion Banks get long, dollar bear "news" comes out, shorts are squeezed and the gold price moves higher again. Cycle continues due to computer models not being able to "learn".

I see a 23.6% fib support at $586, btw.

Hope this helps.

Likely macro scenario: washout in US sometime, for some duration to correct global imbalances, during which time BRIC stocks (Brazil, Russia, India, China) plunge FARTHER than US - since they always do!

(Also China will plunge last, because they will spend, spend, spend through the '08 Olympics)

After that, BRIC's will prosper most, because, as you say, Bill, they need only build the "mod cons" or modern conveniences for their middle classes, in order to prosper.

Lacking venture capital, and US-style opportunity etc. the BIG established companies in those countries will dominate, and be easy to pick.

Brazil has the longest-standing, best developed firms and capital markets, but tends to be the most neglected of the BRIC's. Stock picking will be easiest there ...

That's my baseline scenario, which would allow for huge gains from BRIC stocks from 2010 till 2030 or 2040.

Of course, it could be ALL wrong! Still useful to have a scenario in mind, as long as you change it, when evidence changes ...