The conspiracists answer is "Blythe Masters at JP Morgan in league with the Rothschild interests..."
What that answer doesn't address is the fact that supply has been ample to meet demand, something you can't fake in the cash market i.e. either the seller has the gold or not.
So either the reports of demand are embellished or the supply isn't as tight as some folks believe.
We've bet on the latter, that as we've seen in commodity after commodity, there is a lot of the stuff around.
However in this post the writer raises some serious questions about the demand side which could get us to our $875 downside target faster than we'd hoped.
From the FT's beyondbrics blog:
In the fourth part of our series on gold in India, beyondbrics asks why sales of the precious metal were so subdued before this month’s Diwali festival – usually a peak season.
See also part one, jewellers in a desperate spot, part two, gold loans on the up, part three, the story in charts, and from FT Analysis, India: Part of the fabric.
The run up to the Hindu festival of Diwali – which fell this year on November 3 – is usually a peak season for sales of gold in India. It is held, after all, to celebrate Lakshmi, the goddess of wealth, so buying the precious metal – something many Indians will do at the slightest provocation – is especially appropriate.
But with import controls and duty hikes raising the price of gold this year, festive sales have been less than is usually – as much as 40 per cent less than in the same period last year, according to media reports.
But is this merely a supply side issue?Here's the 5 minute chart from FinViz, $1315.10 last:
“This year has been a little subdued,” Ashok Minawala of the All India Gems and Jewellery Trade Federation told beyondbrics. “People had expectations but I think they were short about 25 to 50 per cent in various places.”
Sales have been hit, in part, by the government’s attempts to clamp down on imports in a bid to tackle India’s worrying current account deficit. Higher import duties and a new requirement that gold importers re-export 20 per cent of every shipment have squeezed capacity in the sector.
“The curbs have been so strong that in the last two months only 15 per cent of imports [compared with usual levels] have come in,” says Mehul Choksi, managing director of Gitanjali, a popular jeweller, where sales are down about 40 per cent. “In a couple of months like April and May there was excess, so 150 to 170 tonnes came in but in the last two months hardly 8 or 10 tonnes of gold has come.”
Price has also been a factor, despite the powerful cultural and religious drivers of demand....MORE
