Gold price is inextricably linked to the $US because they are quoted in terms of each other. Therefore, a strengthening in the relative price of the $US causes an inversely proportional reaction in the $US denominated price of gold.
Notwithstanding an 'upward correction' in US equity markets, (temporary, at this stage, imho) US financial markets are still suffering cash negative inflows and therefore need to supplement these inflows by selling $US denominated assets in non US markets, thereby increasing the demand for $US and decreasing the concomitant demand for the denominated currencies that they are selling, thereby increasing the relative demand for the US currency, and depressing the relative price of gold.
Once this process has been completed, the $US will reduce to its more appropriate level vis-a-vis the other major currencies. This should also provide a boost for the $AUD which will benefit both from a reduced relative value of the $US and an increase in the demand for gold.
Technically, gold is at probably the second phase of a four stage bull market (terms 'second' and 'fourth' are illustrative terms only), purely on the basis of increased physical demand. Should the world financial order fall under increased pressure, gold may again find itself fulfilling a more traditional role for frightened folk seeking a place to hide.
Because of the relative small size of the total gold market, a spike-up in demand causes a disproportionate increase in the price of gold. This together with improved methods of production should cause gold equities, both large and small, to enjoy a smart upward movement in price.
Australian gold producers too are reducing the hedging element of their forward sales, so share prices appear to be trading at attractive entry levels at the moment.
