First, Tom’s GLD chart:
http://social.stocktock.com/photo/2348194:Photo:10458
I worry about gold here without better evidence of a breakout. It could have a glittering future from here, but it could be on the verge of another bad dip, too.

First, a not-so-minor technical point – it is better to use a log vertical scale on a chart when drawing trend lines, so a given vertical distance represents a given percentage. The familiar linear scale uses a given distance for a given AMOUNT, which is a diminishing percentage as price increases. Among other benefits, log charts avoid false “breakouts” in just such a situation as this. Gold may be topping, with a revisit of the 600s a definite possibility if no breakout materializes. This chart expresses the reasons:

The fundamentals in the near-to-intermediate term are not encouraging for gold (although at some point, the switch to inflation will blow the top off). Mohan did an excellent job of presenting the case for some more deflation, which would weigh on gold prices. Also, we are finished with Christmas, the Asian wedding season, and Diwali in India, with the consequent major reduction in demand for physical metal that usually occurs at this time of year. Gold has powerful enemies. The market is thin — large US companies have market caps rivaling the current dollar value of all gold ever mined, which would make a cube less than 20 meters on a side, a bit larger than my rather modest house. Thus gold can and will be slammed back down from here if possible and desired by national governments. The price just fell $20 in ten hours overnight in Asia and London, while the thugs at CRIMEX were still asleep. I hope all share my wish that their year may begin with especially foul hangovers and continue with vicious paternity suits.

There is already talk of US debt being forgiven by Japan and possibly other major creditors, removing piles of dollars that might otherwise help bid up gold. People worldwide have an attachment to the USD that is still strong. As a trade and reserve currency, few people want it to crash, especially with so many other currencies suffering worse wounds. Just when they started to love the Euro, focusing on its parentage of lovely strong stable D-Marks and Guilders, they learn the hard way that its ancestry is also mongrelized by Lire, Pesetas, Escudos, & co. Southern European governments still print money and run deficits to an extent that makes even us seem virtuous, regardless of what they signed in Bruxelles or what the Herrn Direktoren der Europäischen Zentralbank may say. This is especially true since the Bundesbank refused to let the Finanzministerium sell gold to keep Deutschland itself from exceeding EU deficit guidelines a few years in a row. The price of gold is making new highs in Rubles, Loonies, and Pounds, and getting close (making possibly bullish pennants) in Euros, Aussies, and even (gasp!) Swissies. Thus gold is relatively more expensive for many people than it is here. They might hold off on demand until they can get a better deal — just as we look at that dollar gold chart and see a chance of possibly getting it $300 cheaper.

However, charts and fundamentals are especially dangerous with gold, because exogenous events can and do make the best and most experienced gold analysts and chart weenies look silly. Gold prices could spike as a result of the acts of some crackpot bunch from anywhere on the terrorist spectrum. Any one of several wacko national governments, especially those with a narcissistic megalomaniac at the top, could decide that it was time to fulfill its national destiny. If educated, intelligent folks in Germany and Japan could do it during a previous nasty deflation, what’s to stop the world’s goofballs now, especially with us already stretched pretty thin in Iraq and Afghanistan? Who knows what happened to all of Russia’s nukes after 1989? Is one ticking away in the hold of a tramp steamer in New York Harbor, San Francisco Bay, or Puget Sound? What was in the back of that van abandoned in the parking ramp of the mall of America?

I actually know a few Russian nuclear scientists, pretty decent folks, MOST of them. Our “Sister City” houses Russia’s Joint Institute for Nuclear Research. We joked about planning how to vaporize each other. They made smaller cheaper nastier bombs; I did math and wrote software to help kill the most targets of whatever kind with whatever weapons at lowest cost. We’re not war criminals, just following orders and doing our jobs, saving money for our taxpayers – aren’t you glad SOMEbody thought of what your feelings might be a nanosecond before you were transformed into radioactive plasma at a few million degrees?

However, I was always paid MUCH better than the Russian scientists. They also want cars, washing machines, fridges, TVs, PCs, digicams, a whole house, even a modest one, for one family or even one person, Porcelet avec Petites Pois aux Truffes de Perigord, Bernkasteler Doktor Riesling Trockenbeerenauslese 1959, and other simple pleasures of life just as much as we do. Bin Laden has hundreds of millions of dollars . . .

But anyway, back to worrying about OUR money for a change, I will definitely look for more confirmation before venturing back to the world of the gold bugs.

BTW, have you looked at any Uranium stocks lately? PNP.TO has TRIPLED in 12 trading days!