Ann: Metallurgical testwork update at Never Never, page-31

With the dollar index going up from 103 to close to 106 in the last year the old relationship of gold has broken down with gold up from $US2,000 to over $US2,600 ie 30% increase.

The old relationships between the US dollar and POG have well and truely broken down - we seem to be in a completely different world for the drivers of the POG. Central Bank buying, geopolitical risks and massive sovereign debt particularly in the US have changed the game.

Trying to forecast the future POG from the old rules does not apply anymore. What does matter for the future POG is central bank buying, geopolitical risks, buying by non west country citizens, potential ETF buying from western countries (very little to date unlike from 2004 to 2011 which was the key driver of the POG) and never ending increase in sovereign debt which only looks like increasing more rapidly.

You may say you missed inflation which may be a factor if it starts climbing again but the more important item to consider is monetary inflation since increased sovereign debt is going to make it very difficult for the US and other countries to sell debt unless Central Banks try QE - the later is much more important than normal inflation.