healthy movement for gold

I believe this movement in gold is extremely healthy. When it went past $1900 last year it was a precedent to take some heat out of the upward movement. From a psychological point of view when you see prices head to a all time high at a rapid pace, even though there is fundamental support to justify it, the wall of worry sentiment creeps in.

This sell off is helping to settle those nerves. The fundamentals for gold to continue up are still there, now we just need a renewed confidence in buying around these levels without the apprehension of the price retracing further.

If we see another $100-$300 decline, and thats very possible, this would IMO, generate significant buying and gold would be on its way.

One thing that needs to be kept in mind, gold didn't go up because of industrial demand. Its at these prices because its being used as a monetary hedge. I feel Europe isn't ready to financially collapse just yet, before that happens we will see the printing presses fired up and this in turn will support gold.

IMO its also inevitable we will see the US fed start QE3. Europe and China are slowing down, this will effect the US economy and typical to form when their economy slows or isn't growing at the required pace they print more money.

We certainly could see more dramatic drops but I believe when its bottomed, the gold space is one to watch.