The slump in the gold price from approx. US$ 1600 to a low of US$ 1320 within just a few days raises certain questions. Was it only a correction inside an essentially continuing upwards trend? What caused the plunge? What’s going to happen next? It is evident that the physical demand for gold remains strong. Bill Holter, of precious metal specialists Miles Franklin, writes that the ratio of buyers to sellers is still 30:1 and that it’s hard to get hold of physical gold. So was the price slump triggered by massive sales of paper gold? (Paper gold is the term used for certificates which investors can use to speculate on the gold price but which are not themselves backed by physical gold.) There is much to suggest this is so. The large proportion of paper gold in circulation carries dangers with it since, in a crunch, the banks will not be able to hand over physical gold and investors will, at best, only get their money back. During the financial crisis of the last two years the gold price has experienced a very strong rise. Many investors feared the euro would not survive, with all the unpredictable consequences its failure would have. At the present moment these fears seem groundless, and this has put pressure on the gold price, since a lot of “panic buyers” of gold are now selling it again. In our opinion the overall gold situation is totally unclear. Currently gold looks like a ball being kicked around by market players who all have very different interests. As for the future development of the gold price, we’ll just have to wait and see.