That means other drivers for gold are now coming back into focus. While the US dollar is weaker today, it is not helping gold much with the exception of perhaps allowing it to remain above an important level of chart support. From my perspective, the markets looks "heavy".
I keep coming back to the same thing I have been focusing on for the last couple of weeks now - namely - the recent gains in gold have come mainly from hedge fund short covering as their short positions had become rather large from an historical perspective. Now that they have covered a large number of those shorts ( bought them back) there is simply no additional source of buying on a large enough scale to take the market through important overhead chart resistance levels. Large speculators do not have any technical reasons to chase the price of the metal higher and thus they are NOT ENTERING this market in large numbers. Without thrust to counteract the pull of gravity, markets will tend to follow the path of least resistance and that is lower. It will take some sort of economic data news release to trigger any strong, concerted, and more importantly, SUSTAINED NEW BUYING.
As you can see from the price chart, gold is perched right on top of an important chart support level that extends from $1360 - $1355 or so. Bears are gunning to break it down through this region for they realize, if they do, that price will fall rather rapidly to $1325 - $1320. For the bulls to get anything going beyond this boring, nothing-to-the-upside aspect, they will need to clear $1380 at a bare minimum but more importantly, recapture that "14" handle.
The fact that the mining shares seem rather comatose right now is not aiding the cause of the metal. Also, it does not help gold to see interest rates rising here in the US especially since most investors believe that inflation is a non-existent threat for the time being.
The one thing gold has going for it right now is that it is into a period in which it normally is strong from a seasonal perspective. That brings us to same factors which have always been supportive, namely far-Eastern buying of the metal. The question is the same however as it has been for some time now - can the physical market demand for the metal be enough to support a market which is lacking any serious investment demand from the West? The answer to that question is also the same - Yes, the physical market demand can put a floor of support under the gold price but it is important to understand that this demand, while it can be most impressive, is insufficient to generate a sustained bullish uptrend. That will not happen unless western based investors decide to chase the price higher, something which they are not currently doing.
One more thing - at the risk of beating a dead horse - you will note that for all this erroneous talk of "backwardation", the gold price simply cannot make much headway to the upside.