Gold will react to the results of the following events, in chronological order:
1. Europe. Greece and France are both going to have important national elections at the end of April/beginning of May. Greece is especially important, because unexpected events could mean anything from revolution and collapse to a takeover by totalitarian elements from the left or right, which in turn would probably lead to their withdrawal from the euro and some upsetting of financial markets.
Spain and Portugal are the next houses of cards that have already started to fall. We do not know what the European Central Bank (ECB) will do to avoid another default like that of Greece (and yes, we can now officially call it that).
But the question for investors is not whether these countries will stay within the euro, but whether the ECB will again decide to bail some of them out through whatever straw-man arrangements they can find, probably involving the U.S. Fed again.
Conclusion 1: If I were a betting soul (which I'm not usually, but if you've got any money saved at all you've become a gambler whether you like it or not), I'd bet that the ECB will act, and the Fed will help them if necessary. Good for gold.
2. U.S. The American election may be a nail-biter right up to the last minute. We have basically eight possible outcomes:
1. Obama wins, House stays right, Senate stays left
2. Obama wins, House goes left, Senate stays left
3. Obama wins, House stays right, Senate goes right
4. Obama wins, House goes left, Senate goes right
5. Romney wins, House stays right, Senate stays left
6. Romney wins, House goes left, Senate stays left
7. Romney wins, House stays right, Senate goes right
8. Romney wins, House goes left, Senate stays left
I don't know the various Congressional races well enough to prognosticate, but I'll bet (savings obliging) that it's either 1, 3, 5, or 7. The question then becomes:
If it's 1 or 5, neither party will have a mandate. Will the markets see this as more deficit dithering and continued business reticence to hire, leading to maintained Fed ease amid "permissible" inflation? Good for gold (at least stable, with possible strong gains if treasury debt increases).
On the other hand, if it's 3 or 7, the markets will probably see this as sanity coming back to the federal budget. Businesses will finally dare to expand, and the Fed may just get lucky and be able to solve its balance sheet problem without endangering the recovery. Bad for gold but good for the dollar, which in the end is better for all of us.
Trying to weigh the proportionate effect each of these events will have on the exchange rate of most currencies relative to gold is difficult. But I'd rather take a few percentage points off my gains, if and when the world rights itself, rather than sell gold holdings right now.