why is it following the market, page-8

I would be cautious about that - the markets are volatile - surging up and down from day to day - one day its spooked by inflation next it isn't. The net effect of the complex myriad of competing economic forces is increasingly hard to predict.

One piece of ostensibly positive news to indicate that core inflation is (for the moment) in hand does not provide a complete picture. Lets not kid ourselves - the US is not in great shape. In fact quite the opposite in my view. They do a great job of creating a veneer of health when in actual fact all signs point to further demise of their economy and the USD. The USD is losing its value and its place as the safe haven/benchmark world currency with each passing month. I believe recent US bond issues have been well undersubscribed and they are tinkering to try and makes bond rates more attractive. They have been printing cash for a while now to fund their massive spending without pushing up domestic tax rates - and demand for their bonds as a key source of funding is waning. Any attempts to inflate bond rates will only serve to exaggerate the housing slump and take the steam out of corporate earnings and already marginal economic growth.

When you consider that the central banks of many economies across the world are heavily invested in US bonds and treasuries only to see the value of their assets being eroded as the dollar declines and the issues around the health of the US economy come to bear. We are seeing moves away from USD denominated assets by the like of China not to mention countries like Kuwait un-pegging from the USD (which may well see other persian states do likewise). All adds up to a not so healthy picture for the USD from where I sit.

I would be inclined to agree with what some commentators are saying - the US is potentially one serious economic shock (be it an oil supply issue via Nigeria, the middle east, a hurricane, or terrorist event) from a decent tumble. Any signs of inflation re-emerging or depserate tactics to halt a major further decline in the USD could see some of these issues come to bear sooner than you think. Any further rate hikes would not be doing any favours to the housing slump or the recent weak economic growth figures in the states.

Throw into the mix that the EU is yet to normalise rates and itself is likely to ratchet up rates at least twice more before the end of the year and it is almost a certainty the USD will decline further in the near to medium term. Come July / August I think gold will get another shot in the arm.

That's the way I see it.