The Gold Rush Is On

Jon Nadler, senior analyst at Kitco Bullion Dealers in Montreal, said the gold market is being driven mainly by psychological factors.

"It's like the waiting room at a psychiatrist's office," he said. "We've seen fear, despair, greed, denial -- mostly denial," he said.

Nadler said prices could fall further if the metal drops below $1,650 an ounce. But he wouldn't rule out a rebound of about $65 an ounce in the near term.

He said some investors are still expecting the Fed to signal additional stimulus measures at a meeting in Wyoming this weekend. Ben Bernanke, the central bank chairman, is scheduled to deliver the keynote speech Friday.

In any event, he said the recent volatility in the gold market is worrying for an asset that is supposed to be a hedge against volatility.

The drop on Wednesday was the biggest one-day price decline since 1980, he said.

"The psychological damage to the small investor is already shaping up in full force," he said. "They might start leaning toward the side that says we had a bubble, and bubbles don't deflate slowly once they're pricked."

http://finance.yahoo.com/news/Gold-steadies-after-free-cnnm-1134773125.html