Yesterday's mid-morning drop in gold seems to have been much as I surmised, high-frequency computer trading triggered automatically. Kitco reports "At mid-morning the gold and silver markets dropped sharply and rapidly on some fresh technical selling pressure, talk that a large exchange traded gold fund liquidated a large position...". This gold fund dropped a load of gold on the market, and within seconds the computers had dumped their positions as well.
I've mentioned all week the unusual condition of gold rising against a strengthening dollar, and yesterday the dollar won the arm-wrestling contest between the two. After hitting the bottom of its own little cliff at $1,705/oz, gold continued trading roughly between $1,710 and $1,715 through the day and overnight. The long term factors I've mentioned before are still positive for gold, and more analysts are predicting a good year for silver as well.
China will probably take this opportunity to grab another ton or two for their central bank reserves, and the resolution of the EU/IMF squabble over extending the timeline on Greek debt repayment will clear things up on that front. At 9:30AM, COMEX spot gold is trading at $1,710, and spot silver at $32.35.