What would make gold go down?
I was a bear on gold during the 80s and 90s and I turned bullish in 2001. I'm still a bull, but I like to think about the bear case, so here goes.
Gold is very tax efficient, so higher tax rates make gold go up and lower rates make gold go down. No reason here to worry since all governments all over the world are spending like crazy. Lower taxes would be most unlikley.
Gold pays no interest, so higher interest rates on government bonds can make gold go down. I can't see interest rates going up during a woldwide financial collapse. If they do, the economy is going to do some serious contracting.
New mining technologies could make gold recovery easier, thus increasing production and causing the price to fall. This happened during the last century with heap leaching. Right now gold production doesn't seem to be going up very fast despite the high price and I don't know of any new technologies on the horizon. Correct me if I'm wrong.
Gold is always a bet against the US Federal Reserve. If the Fed has things under control and they have a growing economy with low inflation, its a killer for gold. Obviously, things haven't been going the Fed's way recently, but you never know. They may start getting the credit bubble reflating with all the stimulus spending. The problem is that this stimulus is unsustainable (you can't run $2 trillion dollar deficits every year - something has to give sooner or later), so eventually, you get an even bigger crash later on. This could be the biggest problem for gold over the short term. Long term, I still don't see much chance for a sustainable recovery any time soon.
The other possibility is that other things are a better investment. This is a difficult thing to know for sure. Most people who own gold own it as an insurance policy against systemic collapse. It is not something they are in a hurry to sell if something marginally better comes along. I would be happy to sell gold and go into other assets if the price of those other assets was right. Unfortunately, the Fed stimulus program is keeping the zombie banks just alive enough to prevent them from dumping their assets on the market at attractive prices. When those attractive prices come along, I'll be ready. During the Great Depression you could find unbelievable bargains. Where are the bargains? For now the zombies rule.
Please let me know if you think of anything else that could make gold go down, and good luck with your investing.