GOLD HEADS TOWARD $1,100 AN OUNCE

December gold is trading up $7.70 at $1,092.70 an ounce, while silver is up $.28. Gold reached a new record high of $1,096.20. Gold continues to trade near the high and appears dead set on heading above $1,100 an ounce. Barclay's, which correctly forecast the move to $1,100 during the month of November, is now forecasting that gold will rise to $1,140 an ounce in the 2nd quarter of next year. In other words, they obviously expect some form of a consolidation around the $1,100 level. That would be normal, as $1,100 should prove to be a significant resistance level. However, the track for gold seems to be considerably higher.

There are quite a number of analysts who think gold has the potential to reach $1,200 to $1,300 before year-end. In fact, since large round numbers, such as $1,100, are widely anticipated to be resistance levels, it may prove to be that there is no resistance at that level. No one has a crystal ball to determine whether a correction will occur or the extent of that correction and consolidation. What we have witnessed over the past couple of years is that the periods of correction and consolidation are modest and present excellent buying opportunities. Given the tremendous momentum in this market, it would appear that buying gold at anything under $1,100 is going to prove to be a bargain.

There are a large number of analysts who think $1,500 to $2,000 are achievable targets for gold over the next couple of years. Among them are Merrill Lynch's top analyst Francisco Blanch, who anticipates gold at $1,500 to $1,600 in the next couple of years. BofA/Merrill Lynch has consistently under forecast the gold market. Therefore, one might consider that forecast to be a modest or moderate forecast and gold could easily move beyond that level. Dow Jones Wire Service reported, "(Walter) DeWet said the most likely outcome for gold once it breaks above the $1,100 an ounce in coming months is higher prices."

Bart Melek of BMO Capital was interviewed about the gold market on CNBC. He said that central banks are supporting the gold market by diversifying some of their reserves into gold. Mark Haynes then said to him, what you are saying is that this is a conspiracy to drive gold prices higher. Melek answered that it is not a conspiracy and that he wasn't suggesting that at all. He said that central banks simply have accumulated large numbers of dollar and prudent money management requires that they diversify some of those dollars with gold. Haynes appeared miffed at that explanation. This demonstrates that the major mass media is still very anti-gold. That is a positive thing and it indicates that gold has a lot of room on the upside.

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