gold continues it's run higher tonight, up Aus $8.25 to $1,170...

gold continues it's run higher tonight, up Aus $8.25 to $1,170 (US$ up $7.50 to $1064.20.


David Levenstein in an article in Mineweb tonight...

an extract... " various analysts are predicting much higher prices. For example, Citigroup says gold could rise above $2,000 next year. According to an internal client note the US bank stated that gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity. Barclays Capital predicted that the gold price could rise as high as $1,500/oz. The bank is targeting $1,050/oz initially, followed by $1,120/oz. It advises holding long positions in the precious metal.

The gold price is still significantly below its inflation-adjusted high. The price hit $850/oz in January 1980, which represents a price today of about $2,300/oz when adjusted for inflation.

Higher prices are nothing new for me, as I have consistently stated that I believe gold is in a huge bull-market that has many more years to go before peaking. And, although the price of gold can be volatile in the short-term, the yellow metal has maintained its value over the long-term, serving as a hedge against the erosion of the purchasing power of paper money.

Gold should be an important part of a diversified investment portfolio and investors should accumulate a holding of bullion. However, over the last few weeks, gold has offered traders some great opportunities. But, it is important to understand the difference between trading and investing.

You must bear in mind trading is not investing. Trading is a short-term thing. You enter a position with the expectation of exiting it quickly. That can be anywhere from 30 seconds to 3 months depending on your strategy. Investing is a longer-term process, generally lasting years.

As a trader you want to use leveraged instruments such as gold futures. And as an investor you first need to build a core holding of bullion before investing in shares and a gold ETF. Of course there is nothing stopping you from being a trader and an investor, just as long as you understand the difference. And, never sell your core holding of bullion to use for trading.

Technicals

In my Gold Up-Date dated September 21, I wrote about the potential reverse Head and Shoulders pattern that was developing. I now believe that this pattern is real and using Fibonacci Extensions, my next target for gold is $1100. However, once that has been reached, there is much more upside for gold market and by using the H&S pattern, we can see that $1300 is a real possibility."...