going for gold, page-13

Hi RAU'ers

Read this today, mpass it along for what its worth...

But first, let's review the recent price action in the precious metals and related markets. Following the extreme volatility of September through mid-November, when the gold price dropped by around 20%, precious metals prices have regained their footing and are now moving higher once again. Since mid-December, gold, silver and platinum have all moved above their short-term upside resistance levels and are showing cautious but solid upward momentum. We think this shift bodes very well for gold in the New Year. In fact, as we explain in detail toward the end of this update, we believe gold is well-positioned to have an explosive 2009 and 2010.
Here are the latest charts.
Gold

After setting its highest price ever in March 2008, gold entered a classic consolidation phase through July. Then the dramatic commodity sell-off accompanying the first waves of the financial crisis caused price action for gold to become extremely volatile, setting a series of lower highs and lower lows through mid-November. The blue lines on the one-year chart above show this downward trend, which began to reverse itself in mid-November.
Gold has been trending higher since the November bottom and is now in breakout mode, as indicated by the red circle. The movement above its downward trend line in mid-December was the first indication that gold was finally regaining its footing. The small, W-shaped bottom at $840 and, more importantly, the follow-through move over $870 in late December have given us the confirmation we’ve been looking for that price momentum has shifted to the upside.
Gold should enjoy solid support at $840 as it climbs to a higher trading range. Although it may experience technical resistance at $905 to $910, we believe will move higher and test resistance at $950 to $970 in coming weeks or months. So we look for gold to establish an $840 to $940 trading range throughout January and February with bias towards the high side in the near term.
Silver

Silver set a new high for the 21st century in March of 2008, followed by a consolidation period through mid-July before selling off dramatically through October, forming a double-bottom in October and November at just below $9.00. Now it's moving higher once again, as indicated by the blue trend lines on the chart above. This chart shows very strong support at just under $9.00. During its bottoming phase silver was unable to break $10.50; in December, it broke that barrier and has been holding its gains, establishing the steady uptrend channel we see above.
Trading today at 2005 to 2006 price levels, silver is the most undervalued of the four traditional precious metals. In the current environment, it offers tremendous value under $12.00. We expect to see silver priced between $12.50 and $14.50 in coming months.
Platinum

Like silver, platinum peaked in March, consolidated, and then suffered a stunning sell-off. It's now trading at its lowest prices since 2003, though developing a solid uptrend channel in the $900 to $1,050 range, with momentum clearly towards the upside. Platinum should track the gold price in the near term. If gold climbs above $950, as we expect it will, platinum will likely see similar gains. Our readers know we've shunned platinum over the last five years because it became so overvalued relative to gold and palladium, its sister metal. Trading today at about a $100 premium to the gold price, or a little more than 10%, platinum is now reasonably priced for the first time in five years.
Our valuation formula for platinum is relatively simple. Buy when it's priced at 90% to 120% of the gold price and sell it when it hits 140%. Since the early 1980s, this has been the standard gold-to-platinum price ratio. Today platinum is about 110% of the gold price, so it’s a buy. The problem is that we cannot source platinum from any of the world’s major bullion producers. Dealers who have platinum for physical delivery are quoting at least 10% above the spot price, if not more, which we believe to be an excessive premium.

Oil

As the one-year chart shows, few commodity prices suffered more than oil over the last six months. After rising steadily for four years it's now back to 2004 prices. During oil's six-month decline, the price of gold almost completely decoupled from the price of oil— after trading in lock-step, and inversely with the U.S dollar, since 2004. We expect the normal, negative correlation between gold and the dollar to continue, but the positive correlation between gold and oil might not. We'll have to see whether OPEC gooses the price by constricting supplies, as they've said they will, and how the current global recession unfolds.
Physical bullion in short supply
As many of you probably know, supplies for physical gold for immediate delivery, especially modern bullion coins, have been severely strained during the last three to four months. Record demand completely overran existing “on the shelf” supplies of gold from mid-September through November. In December, demand returned to relatively normal levels but supplies remain strained. Mints around the world have been scrambling to meet backorders, often interrupting deliveries. Finally, we're beginning to see some parity between physical supply and demand but we're not back to normal market conditions. Buy/sell premiums for all forms of physical gold remain higher than normal, though they're starting to inch back down to pre-October levels as government mints are catching up.