Gold is use as a hedge against inflation. QE supposed to fuel inflation. But global data has shown that inflation is low. 1. QE3 tapering will trigger: 1a. Rise in interest rates. Bonds n stocks pay interest. Commodities do not. USA 10-yr treasury note is now 2%. Higher rate means the difference between the interest returns from notes and gold is even greater. 1b. USD to be stronger. Means will have lower inflation.
2. Weak demand
2a. China slowdown. Means weak Chinese demand. 2b. India has raised import duty to 8% from 6%. Means lower demand
3. Others
3a. Gold need other commodities to fuel inflation but other commodities prices are dropping 3b. Unwinding of gold ETF positions can trigger further computerized selling of gold 3c. Miners can adjust production cost of gold |