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It seems like every Elliott Wave technician and deflation-leaning guru has come out of hiding.  And they are all very bearish toward gold.  They all expect the dollar to remain strong and they expect the Fed to cut back on QE.  Could they be right?  Well, yes – but they could also be wrong too.  Again, I am only going on “logic,” (it’s one of my faults), but how can the dollar be strong when we are buying our debt with newly created money and without QE, interest rates would rise and the stock market and bond market and housing market would head south.  The government and Fed can’t possibly want that to happen.  The other belief that is propping up the dollar and the stock market is that the economy is getting stronger.  If it is, then John Williams must be dead wrong.  He says the “real numbers” point to a crash in the economy and hyperinflation by the summer of 2014.  I have not lost faith in Jim Sinclair – and I will go with his “QE to Infinity” until proven otherwise.  It’s only logical.

I cannot fathom how gold can continue to fall as long as there is record-setting demand coming from the central banks and the retail buyers in Russia, China, India and the Middle East.  Paper is one thing, but how can it possibly control the market price when people are willing to pay more for the actual metal?

Let’s not make it difficult – either you believe in Jim Sinclair’s logic:  Dollar to fall toward and below 72; QE to Infinity, OR you think the dollar will remain strong and the Fed will cut back on QE.  Gold will perform according to how this plays out, at least for the short-term.

I have made it clear how I feel about this.  I can’t guarantee you that my view will prevail, but it is the logical way to look at things and that’s good enough for me.

Richard Russell thinks all that counts is the way the market looks at it, but he is talking about the paper market, not the physical market.  The disconnect, between the paper and physical gold market must resolve itself.  I say physicals win.

Technically speaking, as long as gold keeps closing ABOVE $1,367.30; gold is holding its own.  We do not want to see gold close BELOW $1,352.50.