Which way will Au turn

After witnessing a roller coaster ride during 2009, the price of gold doesn seem to end its thrilling and adventurous gyration in 2010.
The metal has been caught in a range of $1153 and $1058 an ounce since the year began. Persistently high uncertainty over the yellow metal has been constantly arising from its strong negative correlation to the unpredictable dollar index that has been driven by a confluence of global factors.
The first of these is to see what the US Federal Reserve is thinking. Since gold buyers usually take a cue from the Feds interest rate decision, gold prices in the near future will only decrease if the Fed will lift interest rate significantly.
But chances of that look slim, considering that it just raised the discount rate by a nominal quarter percentage points to 0.75 percent.
Next, is the rising debt turmoil across various world economies, such as Greece, Ukraine and Dubai. At this point in time, global debt woes make it hard to predict gold prices because the talks of rescue packages and loan restructuring are still supporting the value of basket of currencies against the greenback.
But if these economies do not receive adequate monetary or non-monetary relief measures, as is the case likely for now, the euro will lose its strength against the greenback - helping gold to lose its shine down the line.
Then there is that most difficult equation - the China factor. Chinas monetary tightening and the gradual removal of fiscal stimulus packages across the world can potentially shove the global economy towards a double-dip, many have been warning about. If and when that happens, then gold would become the most loved asset again.
The bottom-line is that at current prices, gold may have already found a bottom, unless, of course, expectations of global economy suddenly turn positive in an overnight move.

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GOLD PERFORMANCE

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(tonnes)                          2008        2009   Change (%)

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Total Supply                     3,513       3,890          11%

Total Mine Supply                2,060       2,296          11%

Official Sector Sales              236          44         -81%

Recycled Gold                    1,217       1,549          27%

Total Demand                     3,806       3,386         -11%

Jewellery                        2,187       1,747         -20%

Industrial & Dental                436         368         -16%

Bar & Coin Retail Investment       649         440         -32%

ETFs & Similar                     321         595          85%

Inferred Investment               -293         504          n/a

London PM Fix ($US/oz)          871.96      972.35          12%

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