I'm with the bull crowd...Temporary correction,but inflations numbers don't correct like that..and they continue to rise...and gold will recover to hedge against it..Probably the uS is flooding the gold market to prop up the uS dollar...Wouldn't surprise me in the least..

read this..

Out this morning..

Lisa Wright

Business Reporter

Along with every other gold mining executive, Sean Boyd has been forced to watch as the price of both the fickle yellow metal and his company's shares took a spectacular nosedive over the past month.

Given gold's recent reversal from a bull run that took it to a record $1,030 (U.S.) an ounce in March down to a relatively lacklustre $808.20 yesterday, you'd think the chief executive of Toronto's Agnico-Eagle Mines Ltd. would be downright panicky.

Parked in his quiet King St. E. office, Boyd is keeping a brave face. After 23 years in the bumpy bullion business, he's strapped in for the commodity's wild ride. And he fully expects, along with most industry guys, that it will take another run at four digits in the coming months. It fell another $16.80 in New York yesterday.

"We saw a 20 per cent retracement in the gold price back in '06 and we've seen a 20 per cent retracement this year. It's been volatile, there's no doubt about it.

"Would we rather have not seen it? Yes, but it is what it is and we'll just drive forward. We've seen it before," he said in an interview.

But is it déjà vu or is this new territory?

With global inflation rising and bullion – the classic safe haven hedge against it – still taking a beating, some market watchers wonder if it's just a correction or whether it's the beginning of the end of gold's glorious rally.

Either way, the gold bugs are certainly feeling the pain lately.

Over the past four weeks, as the precious metal lost a staggering 15 per cent of its value, gold equities big and small got clobbered.

The Toronto Stock Exchange's gold index sank 28 per cent. Golden Star Resources Ltd. dropped 37 per cent and Northgate Minerals Corp. fell 34 per cent while senior producer Goldcorp Inc. lost a whopping 33 per cent of its share value.

Agnico-Eagle and Kinross Gold Corp. fell 30 per cent, while the world's top gold producer, Barrick Gold Corp., sank 29 per cent.

Analysts say a good chunk of the story is the rebound in the U.S. dollar, which always moves in the opposite direction to gold. The greenback has soared versus the euro in recent weeks. Meanwhile, U.S. consumer prices jumped to a 17-year high in July.

The consumer price index climbed 0.8 per cent, twice as much as anticipated, the U.S. labour department announced yesterday in Washington.

The cost of living was up 5.6 per cent in the year ended in July – the biggest surge since recessionary times in January 1991.

Merrill Lynch economist David Rosenberg argues that declining inflation expectations could be the reason why people aren't clinging to their gold bars just yet, and that it's a big underpinning for the equities too.

"August is typically a period of doldrums for the industry, but it's weaker than what we had initially anticipated," noted Barry Allan of Research Capital Corp.

"The stars have come together for people to say that" it's the end of the good times for miners, he said, although he remains bullish on bullion plays.

Still, folks out in gold land expect things to get worse before they get better. Goldman Sachs slashed its forecast on gold prices yesterday, citing overvalued bullion and the expected strength of the U.S. dollar against major currencies.

The U.S. brokerage lowered its three-month gold outlook to $745 an ounce from its previous view of $890 an ounce.

Goldman cut its gold forecast to $810 from $905 on a six-month basis, and to $740 from $810 on a 12-month basis.

"The $800-an-ounce mark is a key technical area for support. I don't believe it will go much lower" than that in the near term, said Ian Ball, vice-president, Mexico, for Toronto junior explorer U.S. Gold Corp.

Meanwhile, Boyd says he has no problem taking $800 or so an ounce for his gold, considering it fetched only $550 two years ago.

"There were a lot of people that weren't properly positioned when gold ran to $1,000 and said, `Oh, we've missed it.'

"And now there's a chance to get back in," he added.