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GOLD Explained: A Brief Note on Recent Market Action

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Gold's failure to sustain its recent price gains, gains achieved over the past few weeks, triggered a wave of computer-generated technical selling on Monday morning that, in minutes, knocked gold prices back down to psychologically important technical support levels just above $1300 an ounce.

I do not subscribe to any of the various conspiracy theories to explain gold's latest tumble, even though the recent news and gold-market fundamentals suggest the yellow metal should be moving higher.

(For more on this bullish view, see "Gold: Now is the Time," NicholsOnGold, July 2, 2014.)

The idea that the gold market is somehow rigged by the Federal Reserve, other major central banks, and/or the big bullion trading firms in an attempt to discredit the yellow metal and suppress its price strikes me as simply ludicrous.

However, I do believe that any of the major gold-trading firms or large-scale institutional speculators — acting independently — has the power to knock gold one way or the other by $25 or even $50 an ounce or more when the internal technical triggers are properly aligned.

Moreover, it would not surprise me if two or more of these big gold-market speculators, though acting independently, appear to be in cahoots as their computerized robotic trading programs react simultaneously to the same gold-related information, financial-market news, and internal market action.

(For more on this theme, see "Dark Pools, Program Trading, and the Price of Gold," NicholsOnGold, April 2, 2014.)

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