"Which way do you think gold would react if the article on the front page of today's FT entitled: "Eurozone woes threaten global liquidity levels" becomes reality? In 2008 the liquidity squeeze took gold downwards. Are circumstances different now? It seems that supply and demand are reflected in the price. The two unknowns: global liquidity and Israel/Iran are not in the price yet!"

David Fuller's view On a day-to-day basis, I think fluctuations in the price of gold or almost any other asset are determined mainly by investor sentiment, increasingly exacerbated by high frequency trading.

I also feel that trying to guess how daily news flows might affect the price of gold is largely a waste of time. Price chart action, which reveals both sentiment and money flows, is a far better guide.

On a medium-term basis I would say that a significant decline in global liquidity levels will weigh on the prices of most assets, including gold, just as an increase in liquidity will be a tailwind behind the prices for most assets, particularly where abundant supply is not a headwind.

On a long-term basis, I maintain that gold is hard money which will maintain its purchasing power relative to fiat currencies more often than not. The main exceptions are when short-term interest rates are historically high, and / or when gold has soared in bubble conditions. (See also comments on gold below.)