Impressive moves in the gold price have continued this week, as the fortunes of the metal wax and wane with risk appetite in the market.
 
The yellow metal moved above $1900 per ounce for the first time, but then fell back again following news that the German constitutional court had opted not to unleash havoc on global markets by deeming the eurozone bailouts illegal. QE speculation has abated this week as markets try to determine whether the mixed US economic data makes further easing more or less likely, and so the rush for gold provoked by the possibility of QE3 has eased, while a lessening of panic in the eurozone has stopped the flight for gold on that front has well. However, this could well be the calm before the storm.
 
The Fed is unlikely to tighten policy in the US for a long time yet, while the eurozone crisis could flare up again at any minute. I still think it's likely that we will get past the magic $2000-per-ounce level this year, but investors should be cautious around this level, since such so-called ‘psychological levels’ exert strange influences on investors, and gold could fall back quickly once the level is hit (as we saw with silver once it neared $50 per ounce).