I was quoted in a story by MarketWatch this morning http://www.marketwatch.com/story/a-reality-check-for-investors-mulling-sale-of-gold-2009-11-20. I must admit that I got the story wrong. Unfortunately I did not have a crucial piece of data. I saw the following statistic in the Financial Times ” Short View" column this morning:

"But as Ticonderoga analysts point out, State Street's gold ETF is among the biggest holders of gold in the world. Indeed, ETFs backed by physical gold are now buying the equivalent of more than 20 per cent of new production, nearly double last year's levels."

So what is driving the demand for gold is not carry trades, governments, or even the underlying economics. It is simply speculation in ETFs. I believe strongly in ETFs. I feel that they are the only way to invest, but in speculative alternative assets there are definite risks. These things are no longer reflecting the market, they are the market. And since apparently they are rising on speculative momentum, they can fall on speculative momentum just as quickly.

William Gamble