"I am concerned about your comment that the Paulson Fund might be about to sell (some of) its large gold holding and the effect that such a move might have on the market. Have you heard or seen anything that leads you to this conclusion, or is it just conjecture on your part?"

David Fuller's view My assessment of gold yesterday commenced with this comment:

A considerable amount of short to medium-term money has definitely moved out of gold since its numerical all-time high at $1921 on 9th September 2011, judging from its current and fourth decline back below $1600.

My fifth paragraph, of seven, included this comment on the Paulson Fund:

… since bears currently have the medium-term trend on their side, it is up to gold bulls to prove that previous support near current levels remains strong. They have yet to do so. Meanwhile, there is a risk that investors in John Paulson's fund will also reduce their exposure.

I have no idea what Paulson or investors in his fund are thinking but since Soros and others have reduced exposure, I will not be the only person wondering if the Paulson Fund is viewed as potential supply overhanging the market. Additionally, short sellers are certainly hoping for more stale bull liquidation in gold.

I closed my leveraged long position in gold a few weeks ago because it was moving against me and as a discipline, I did not wish to add more capital than the money I had made in precious metals a few months earlier, mostly during last August and September. I often trade with leveraged spread-bets because of their tax advantage in the UK. However, had I been holding an unleveraged position in gold bullion, I would almost certainly still be long because I think there is more medium-term upside than downside potential for gold from current levels.

Gold remains hard money, in my view, but its value will obviously fluctuate. If I had had my wits about me a few months ago, I could have been long gold in Japanese yen, or gold in South African Rand (from which the email above came), or even gold in sterling (my domestic currency). To see gold in other currencies, visit Relative Charts - Commodities & Indices in Currencies, in the Fullermoney Chart Library.