bill downey discusses technical and fundamental reasons for the breakout in the price of gold:

Usually demand from jewelry and India tail off at this point of the year, and gold corrects much harder. The reports coming from India and the jewelry market were way below average this year as well. The bear's saw their chance in September and attempted to take the market down in the latter half of the month.

But this year it’s different. The investment community has stepped in and "demanded" gold in the physical markets and the paper tigers. (futures, etf's)

Then just last week India dropped a "bunker buster" on the community by issuing a contra seasonal news story. It was BUYING GOLD!! The seasonal players, the perma bears, and the banks (who have shorted some 30% of Planet production) had to run for cover. The buying on the ask was so strong that it took back all of the selling of the past two weeks on the bid.

The seasonal chart below indicates the last week of October is one of the strongest down weeks of the year. And in fashion, gold did pullback in that time frame. But the bullish aspect was how little gold pulled back in price, only 46 dollars, less than 5% during the total price retreat. This time frame usually ushers in a complete retracement of the September rally.

This year's pullback in October, if we think about it, was just gold pulling back during options expiration and the rollover of the October contract. So technically speaking, that was very normal and it satisfied the October pullback.

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