What's driving gold's fall?

But what is driving the falls? Surely everyone can see the fundamentals behind gold? That may be, but short-term speculative capital does not care about long-term fundamentals. It is looking for quick gains and it appears to have driven gold into some kind of short-term, blow-off top.

As we head into year end, there are a lot of fund managers who will want to lock in their profits for the year. I'm afraid that means they will sell their gold – and anything else they own that has done well – at the slightest hint of a turn in the markets, because they will want to secure their gains (and their bonuses) on what will have been an excellent year. That's what we saw on Friday and why the market fell so hard, so fast.

In the short term, this does not bode well for any market – except one. It may be that we are finally seeing the end of the 'Great Reflation Trade', this astonishing rally out of the crash. For the large majority, locking in profits will mean locking in US dollars. And we have repeatedly said that it's the US dollar vs everything else. If it rises, stocks will fall, commodities will fall – even corporate bonds and UK house prices may start to fall.

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