DaveLast week I expressed suspicion over the fact that the gold price had pulled back for no real apparent reason.  As the entire world seems to be lining up to confront the default or print options for ending credit crises, gold dropped to a level $95 below it's recent high.

In examining the charts and trading activity over the last couple long holiday weekends, a trend emerged that could offer some explanation.  As domestic markets slow down, in anticipation of coming holidays, opportunities present themselves.

I'll just cut right to it.  I think China watches for these opportunities like a hawk.  It's no secret China wants more gold.  They often downplay just how great their desire to accumulate is, but make no mistake, they are buying gold like there is no tomorrow.  Hence, the theory was espoused, just last Tuesday (see story here) to be exact, that China was waiting till our domestic markets took eyes off gold trading, to pounce on as much gold for sale as they could find.

Then just as predicted, as markets re-opened Tuesday, gold prices rose from $1486 last Friday to a quick $1510 and then $1516 in the aftermarket.  Then, no sooner did gold make a not-so-stealth $29 move higher than reports begin to circulate, predicting gold at $1800 between now and December.

As budget deadlines approach, rest assured, debt is on the rise and with it the potential for more printed money a weaker dollar and higher metals prices.  (At least in my humble opinion.)  And while Greece's on again off again bailout seems to be on again, others wait in the wings to make headlines of their own.  Spain, Portugal, Ireland . . . next!

What I see, is that after Europe goes through a series of bailouts, via printed money, the U.S. will resume with some other new and humongous QE equivalent as the race to debase continues.  I don't see gold prices going anywhere but up and I don't see gold demand falling off - not by one ounce.  In fact all evidence suggests, there just isn't going to be enough gold to go around.

So next time you think of selling low because you're bored and you begin to believe all the rhetoric about the gold rally being over, know this.  Nothing has changed except the level of our debt.  And, for every ounce you are willing to sell there is someone waiting to buy two.

$1800 by December?  This may be a little light.