By: Dr. Christian Normann, Chief Strategist, Normann Financial

Gold reached our forecasted short-term target of $1200 +/- about 2 percent, and we closed our gold and silver futures trading positions at gold $1190 and silver $18.83 (we usually close trading positions at least 1 percent before the expected target, as ideal targets routinely get over or undershot by a couple percent).  The odds absolutely did not favor maintaining our long trading position with gold stretched about as far above its 10 week moving average as it normally ever gets.  Of course, we did not sell our long-term gold investment position held since early 2003.  Looking at the first chart, gold has pulled back after touching the old 2005-2007 trendline (it has now pulled back from that line three times since September 2008).

Gold, silver, platinum, and palladium appear to be having a short term correction - probably of about 6 to 10 percent from the high for gold (for some reason about 9 percent is common).  We are looking to re-enter our long gold, silver and GDXJ (Junior Gold Miner ETF) trading positions when gold trades closer to its 10 week (50 day) moving average (currently around $1090 and rising about $3 per day).

The upper orange channel line is presently around $1125, and although we may well see the gold price temporarily trade below it, we do not expect a weekly close under it (which would be quite negative, and would increase the likelihood of a deeper and more time-consuming correction).

On the other hand, the long-term view of gold is that it broke out of a 19 month long base when it had a weekly close at $1048.  Gold is thus expected to have major support between the two red lines at $1033.90 and $978.  It would take a weekly close below $970 - which we do not consider likely - to indicate a failed breakout and possible end to the major bull market in force since the 1999/2001 lows. 

We expect gold to trade above $1400 by some time in the spring of 2010.

Gold a Hit New Record High Measured in Non-U.S. Currencies

The chart below shows the gold price divided by the US Dollar Index Bearish Fund.  In effect, it shows how gold is moving when measured in the currencies the US Dollar Index consists of.  The index is a weighted geometric mean of the dollar's value compared with:

Euro (EUR), 57.6% weight

Japanese yen (JPY), 13.6% weight

Pound sterling (GBP), 11.9% weight

Canadian dollar (CAD), 9.1% weight

Swedish krona (SEK), 4.2% weight

Swiss franc (CHF) 3.6% weight

Two months ago, when gold broke out from a cup and handle formation marked by the thick green line, we said we expected this to be the start of a significant move against paper currencies in general, not just the U.S. Dollar.  That move accelerated, and has brought gold to the next likely hurdle - the February 2009 high..

Gold may require two or more attempts to log a solid weekly close above that high (a significant high is usually not successfully broken on the first attempt), and we would not be surprised to see a pullback to around 38 +/- 1 before a clear break of the old high.  We do not consider the close slightly above 41 as sufficient to count as a break, especially as gold priced in Euros (not shown) closed slightly below the February high both last week and this week.