By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

Tracking the numerous ongoing bullish factors for gold is quite a chore. There are, quite literally, so many compelling arguments for holding our favorite metal that I used to catalog them each month in our letter.

The reason there are so many “reasons” is because gold is unlike any other asset. It…

• responds to its own supply and demand
• protects against short-sighted government actions and interventions
• is a bellwether of market sentiment and economic outlook
• protects against currency devaluation and inflation
• is global
• is one of the most beautiful metals ever found in the earth’s crust
• is a store of value
• is timeless
• is money

How many assets can you say have all those characteristics?

In spite of gold’s recent correction, the reasons haven’t decreased. In fact, the case for holding gold is stronger than ever. And over the past two weeks, a few “reasons” have surfaced that have fallen mostly under the radar. These, I believe, portend a higher gold price. In fact, it is catalysts like these that could end up in our children’s history books that, in retrospect, were obvious to see…

1. For the first time ever, China has invested in GLD, the gold exchange-traded fund. Their sovereign wealth fund, China Investment Corporation, recently invested $155 million in the ETF. The amount represents only 0.05% of the sovereign funds’ $300 billion, meaning there’s a lot more where that came from.

Those mainstream lemmings who predicted China was done buying gold now have to deal with the reality that this move more likely signals they are closer to the beginning – and not the end – of a long-term strategy to diversify into gold.

2. The Prime Minister’s Office in India is creating a stream-lined process so that the country’s state-owned corporations can “aggressively pursue the acquisition of strategic mineral resources.” The Indian government, normally known for thick-layered bureaucracy, has created a centralized body that will have “rapid strategic and decision making powers.” This is telling, both from the perspective that they see some urgency to the matter, and that the acquisition targets are minerals.

Given the country’s historic propensity to own gold, it’s not a stretch to think the yellow metal will be high on the list of “strategic investments.” Recall their government purchased almost half the IMF gold for sale last year in one fell swoop.

The upshot? Don’t be surprised to soon hear of India following China’s lead of buying precious metal companies and resources.

3. “Iran is now a nuclear state,” declared President Ahmadinejad last week. The Islamic republic has produced its first batch of high-level enriched uranium, which they claim is solely for electricity purposes but can also be used to create material for atomic weapons if enriched to 90%. In response, the U.S. imposed new sanctions, and the U.N. is considering adding more of its own sanctions, too.

The West recently proposed that Iran export its uranium for enrichment and then have it returned as fuel rods for a reactor. Iran demanded changes to that plan, which were rejected, so claimed they had “no choice” but to start enriching to higher levels on their own. “God willing,” declared Ahmadinejad, “daily production will be tripled.”

I’m sure this will all just blow over, right?

4. The U.S. government must inflate. Here’s another reason we think that sooner or later inflation trumps deflation… by 2020, government economists project that entitlement benefits (Social Security, Medicare, etc.), along with interest payments on the national debt, will devour 80% of all federal revenues.

This assumes entitlement benefits don’t grow, which, of course, they are. The overall national debt, meanwhile, will rise to 100% of GDP within a few years, an alarming level by any measure. Even Moody’s warned that our credit status could lose its triple-A rating if the nation’s finances don’t improve, an unheard-of prospect just a few years ago.

So, we’re abruptly fleeing our debt-adding habits, right? As you probably heard last month, Obama signed legislation that raised the cap on government debt from $12.4 trillion – already close to being breached – to $14.3 trillion to permit more borrowing. As Doug Casey has pointed out numerous times, this is the exact opposite of what the government should be doing and will have serious inflationary ramifications.

There’s only one way out: devalue the dollar to reduce the debt burden. And the direct result of that is a rising gold price. We may very well see another round of deflation, but the endgame is inflation.

What I would point out is that any one of these reasons would be sufficient for wanting to put some gold in your portfolio. It’s the cumulative effect that’s potentially scary, one that argues we should be overweight precious metals at this point in history. The reasons are numerous and, in my opinion, overwhelming.

Physical gold and select gold investments should be a cornerstone in everyone’s portfolio. Learn about The 3 Best Ways to Invest in Gold, in our FREE 12-page special report… including “Our top gold fund and stock picks revealed.” Click here to read it now.

Click The Chart To View The Video

Gold has made some exciting moves recently, but what can we expect in the future? In today’s video, Adam points out five reasons that he does not expect gold to make a new high just yet.

Last week ended on a positive note with stocks and commodities pushing higher into Friday’s close. The market overall is looking very unstable here and this week I figure there will be some big price movement.

Below are the charts on the DIA, GLD, SLV, UNG and USO funds so you can get a feel for the trend and additionally what I am looking for this week with respect to prices.

DIA – Daily & 60 Minute Chart
The Dow, along with the other indexes, has formed a bear flag and can be seen on the daily and 60 minute intraday charts below. This price pattern is a negative one and points to lower prices in the coming week.

If we get one more thrust down I figure it will spook the rest of the weak hands which in turn is a setup for a very nice multi week rally. If this flag turns into a rally then we will simply wait for a pullback and buy when there is a low risk setup.

GLD – Daily Chart
Gold has been doing much the same as the over stock indexes and I feel the same will happen here. We could see price rise for another day or two as it tests our blue resistance level before heading lower.

SLV – Daily Silver Chart
Silver has formed an interesting pattern the past few months and has now broken down. Silver’s chart continues to look weak as it drifts up to test resistance with a bear flag pattern that points to lower prices in the coming days, much the same as gold.

I hope everyone had a great weekend and valentines day. My daughter Mirabelle was born this weekend on Feb 14th (Valentines Day). Everyone is healthy and happy!

You can get my weekly trading report sent via email to your inbox if you visit my website: www.TheGoldAndOilGuy.com

Chris Vermeulen

The Mad Hedge Fund Trader

Brace yourself for the impending gold shortage. Gold shortage? Yup. With the launch of a flurry of dedicated gold ETF’s last year, total ETF holdings of the barbaric relic, now exceed total world production. South Africa suffered its steepest decline in gold production since 1901, falling 14%, to a mere 232tons. It now ranks only third in global production of the yellow metal, after China and the US. Severe electricity rationing, a shortage of skilled workers,and more stringent mine safety regulations have been blamed.

Choked off credit has frozen the development of new capital intensive deep mines, and existing mines are easily flooding. Rising production costs have driven the global breakeven cost of new gold production up to $500 an ounce. It takes a lot of labor,fuel, and heavy machinery to rip gold out of the ground, and none of these are getting any cheaper. Political risks are heating up. In the meantime, the financial crisis has driven flight to safety demand for gold bars and coins to all time highs.

Last year, the US Treasury ran out of blanks for one ounce $50 American Gold Eagle coins, now worth about $1,160. Competitive devaluations by almost every central bank, except Japan, mean that currencies are not performing as the hedge that many had hoped. It all has the makings of serious gold shortage for the future. The current downturn has to be just a blipin the long term bull market. Now that we are solidly over $1,000, and recently kissed $1,225, the match could hit the fuel dump at any time. Just let thiscurrent risk reversal burn out before you load the boat

Everyone is wondering if gold, silver and the indexes have bottomed after last week’s heavy selling. To put things into perspective there were over 30 sell orders for every 1 buy order at the NYSE. That is pure panic and to confirm extreme fear, several of my broker buddies said last week was crazy with clients demanding to liquidate their positions ASAP to be 100% in cash.

This type of sentiment and price movement warns us of a possible market bottom. I am getting the feeling that traders and investors have been expecting this sharp drop I don’t see or feel a large amount of fear in the marketplace. Last Thursday and Friday war crazy but I think we need one more drop to really shake things up before a bottom is set.

Below are some charts showing where the market currently stands and what the charts are pointing to.

GLD Gold ETF Trading – Daily Chart

Gold is clearly trending down on the daily chart. One more thrust down should shake things up enough to trigger the next rally.

SLV Silver ETF Trading – Daily Chart

Silver has formed a Head & Shoulders pattern and has broken through multiple support levels. A measured move to the down side would be $14 for silver which could happen in the coming days.

SP500, NYSE, GOLD Futures, US Dollar Index – Intraday Charts

These charts clearly show the price action of the past month. As you can see the trend of stocks and gold are down with consolidations (pauses). This is the exact reason why you must trade with the trend and not do counter trend trades. Bounces are more like sideway movements making it very difficult to try and play bounces in a down trend.

If you focus on selling at key resistance levels then moves tend to be much more profitable. That being said, we did go long last Friday because of the extreme oversold market level. I was expecting a follow through Monday or Tuesday which has yet to happen. We have now moved our stops to break even or better to eliminate our down side risk.

Spot Gold 24Hr Trading Chart

This chart says it all. The market and gold is very volatile making it difficult to trade right now. Bulls and bears are battling it out. Only time will tell!

Stocks & Commodity Trading Conclusion:

In short, it’s been a slow week without any real exciting moves. Thursday and Friday could be interesting if traders exit their positions going into the long weekend in order to protect themselves from any surprise economic news.

From the looks of gold, silver and the indexes I sense selling could be just around the corner. We are currently long a few positions with our stops are break even or better in hopes for a pop and rally going into the holiday weekend but only time will tell.

My wife and I have our first child due on Saturday so I may disappear for 1-2 days in the coming week as we welcome our little princess into this new and exciting world.

If you would like to receive my trading reports directly to your inbox please visit my website at:

Chris Vermeulen
www.TheGoldAndOilGuy.com

On Friday analyst Dennis Gartman weighed in with his take on yesterday’s commodity market weakness.

Commodity prices have all but collapsed as the dollar and the Yen have soared, and nowhere was that more evident than in the precious and base metals markets. Grains might zinc, aluminium, tin, et al… break trend lines in tandem one with the other and do so collectively and rather clearly only the un-wise or stubborn to not pay heed. The weakness of the base metals collectively is telling us in the very loudest of terms that there is at least doubt as to the efficacy of a global economic recovery, and there is growing concern that a re-entry into recession is likely… perhaps even certain. Attention then must be paid. Night flares have been sent up.

Turning then finally to gold itself… the “King” of all metals… we cannot help but think that as gold trades this morning “at the Battle of Hastings” price ($1066 earlier this morning) that this is the only metal we would wish to be long of. In a deflating environment we needn’t own platinum, nor palladium, nor silver, nor copper, nor zinc et al; but we may wish to own gold and gold only for when inflationary push come to deflationary shove only gold endures. The gold bulls were taken out behind the shed yesterday and tossed into the same trash heap of liquidation that the copper owners, zinc owners, rhodium owners and others were tossed into. The margin clerks ran amuck yesterday, and they looked to gold for liquidity for it almost always can be found there. But now that the dust has settled, we own gold and we own government bonds as evidenced by our recommendations below. We’ll sit tight with both… for now.

For more information on Dennis Gartman’s “The Gartman Letter”

How to spot GOLD  mega trends

David A. Banister

Around two months ago I advised my Partners to look for Gold to drop to the 1040-1070 area in US dollars. This followed my projection in early August of a Gold rally from 900 to 1250 before the next top, and I was close as we hit $1,225 and rolled over. This correction so far in Gold is normal in a bull market, and is intended to knock everyone off the back of the bull. The bull likes to make sure as few people as possible are along for the ride.

Currently we are seeing a strong counter-trend rally up in the US Dollar. Investor’s should keep in mind that the dollar index is simply a mathematical calculation against a basket of other currencies. In this case, 57% of that formula is the Euro. The Euro has had a dramatic correction and is likely to continue to drop due to problems in Greece and other countries. This makes the dollar look better on a relative basis, but investors should remember this is largely cosmetic. Deficits continue to balloon, debt ceilings are raised, and the US Treasury has to rollover a significant amount of Treasury Bonds this calendar year. Traders and Investors over-react to the rallying dollar and start selling off Gold and Silver as fast as they can. However, at some near term point, Gold is likely to firm up and bottom regardless of the dollar rally. There has been no fundamental shift in the US Dollar or it’s merits in my opinion, and in fact, the recent economic events are only making Gold look more attractive relative to other world currencies. This pullback is required to work off the excessive optimist we saw in early December.

Most recently on January 22nd, I wrote an update to my December 4th forecast for Gold. In that update I mentioned that Gold was in a “C wave” down, and would likely bottom around 97-102 on the GLD ETF. You can read the entire article here:
http://activetradingpartners.com/articles/2010/01/gold-continues-in-c-wave-down-dave-banister-jan-22/

A pullback in Gold to the 102.50 area on the GLD ETF would fill a “Gap” in that chart, and represent a normal bull market 50% correction of the last swing. A further decline to the 97-98 area on the GLD ETF would represent a 61% Fibonacci re-tracement of the entire rally from April 2009 into December 2009. This correction in my opinion could continue into early March or May of this year, before the next leg up begins. Gold investors are advised to scale into Gold as 1040 US is hit, and all the way down to $980. At that point, the bull will continue to new highs as the smart money will be accumulating the gold dips in my opinion over the next 30-90 days.

David Banister

David Banister is the Chief Investment Strategist and founder of www.activetradingpartners.com. David uses his unique methods of forecasting major market turns in addition to Gold, Oil, Sectors, and individual stocks with counter-intuitive methods he has developed over twenty years of investing.

Free E-Mail Trading Course Here

Gold – 24 Hour Trading Chart Using 8 Hour Bars
This chart allows us to look far enough back to see key support and resistance levels. Today we saw gold sell down with rising volume which is bearish.

Jeff Clark, Senior Editor, Casey’s Gold & Resource Report

My Grandmother’s favorite word for politely describing the obtuse among us aptly characterizes a recent attack on gold. And that it comes from an investment magazine that commands front-of-the-rack prominence in waiting rooms across our great land is reassuring evidence we have a long way to go in this gold bull market.

Money magazine’s January/February edition ran an article near the rear of the issue titled, “Coming Down with Gold Fever.” The author paints a decidedly negative picture of gold, going so far as to compare gold’s rise to some of history’s greatest asset bubbles (tulips in the 1630s, Internet stocks in the 1990s). The article is so blatantly biased and inaccurate that I decided to have a little fun with my rebuttal.

Regular readers know I affectionately refer to the gold debunkers as “Bert.” You judge if this author is worthy. What follows are the article’s claims, along with my advice on How to Talk to a Nincompoop (HTTTAN)…

“Gold is now the world’s ‘it’ investment.”

HTTTAN: You’re absolutely right! A few cable TV commercials clearly signal the world has latched on to gold and is dizzy with excitement. The bestsellers at my local bookshop all scream with titles about gold. The radio waves are sparking with talk about buying, storing, testing, and securing all the different options with gold. And all those live newscasts from the lines outside gold shops across the country are really getting old.

►If gold were in a mania, it would resemble the dotcom craze of 2000, where companies with no profits traded at 400 times earnings; when investors were leaving their brokers to chase the latest tech stock; and where everybody and their brother’s dog was talking about the hot technology stock they just doubled their money on. None of that is happening now.

Besides, there’s a good reason investors have been buying gold: it outperformed most other investments last year.

And gold stocks tripled the performance of the Dow, more than doubled that of the S&P, and outran the Nasdaq.

“The price of gold is the only thing rising… gas costs less than it did a year ago.”

HTTTAN: Well, my blood pressure rose when I read your article – does that count? And whew, I’m glad I misread my DirecTV bill announcing higher monthly charges. Higher fees from my bank? Must’ve had my glasses off while checking my last statement. So, are you suggesting we wait till there’s rampant inflation before we buy gold?

►To start, the national average gasoline price rose from $1.70 to $2.70 a gallon over the past year, a 58% increase. The data disproving this blatantly inaccurate and misleading claim is available free on the Internet. If you want to talk about things rising, how about the monetary base that more than doubled over the past 18 months to nearly $2 trillion, the steepest increase ever.

When you think of inflation, you apparently think “higher prices.” News flash: price inflation stems from monetary inflation, and monetary inflation has ballooned. Price inflation is a tidal wave building off the coast. Don’t get caught sipping piña coladas on the beach.

And you’re right: gold is the only thing that’s been rising over the past decade! Ergo, that’s been the place to be with a meaningful portion of one’s investments.

Gold is doing what it’s supposed to do: rise in times of crisis!

“Gold isn’t that inexpensive. And who says it’s guaranteed to return to old highs?”

HTTTAN: Who says?! How about the laws of economics! My teenage son even understands this: the more you print of something, the less each one is worth. And as the dollar continues deteriorating, gold will continue rising. And gee, Wally, they can’t print gold.

►Adjusted for inflation, gold’s peak at $850 in 1980 would equal about $2,300 today, more than double its current price. Guaranteed? Of course not. Where would I find a guaranteed investment? But I’ll put the 5,000-year history of gold ahead of anything that is touted as “guaranteed” in the popular press.

“Even China is wary of gold prices rising too much.”

HTTTAN: Huh? China’s recent comment that they may not buy much gold right now was referring to their desire to get a better price, not a change of heart. In fact, there are so many articles about how the Chinese want gold that it’s hard to catalog them all.

►Liu Yuhui, an economist at the Chinese Academy of Social Sciences, said last quarter that China might again scale back purchases of U.S. debt on concerns the dollar will decline. And this after their holdings were already lower in November than they were last July. Is it possible the Chinese – and the myriad other governments concerned about what U.S. leaders are doing to the dollar – will stop buying gold for protection? Anything is possible, but it’s far more likely that they’re just getting started, considering that just 1.9% of their foreign reserves are held in gold. I think even Money magazine agrees with the merits of diversification.

And this just in: An ING survey reports that 45% of investors in Asian markets (excluding Japan) picked gold as their most favored tool to protect their returns from inflation, more than any other asset.

“Only a small number of sophisticated investors are getting in on the action.”

HTTTAN: You mean like some of the most successful hedge fund managers in the world? Wait – are you suggesting we follow your advice instead? I’ll consider that when you show me that article warning of a market top in ’08 and urging your readers to get out. Instead, I seem to recall your magazine’s giddiness as the market peaked. Perhaps that explains why many “sophisticated” investors use your magazine as a contrary indicator.

► Investment management firm Moonraker reported in a 2009 survey that 20 out of 22 fund managers interviewed bought physical gold for personal investment because they fear quantitative easing programs may lead to inflation. In other words, not only are they buying gold in their funds, they’re stashing some at home.

Further, central banks are now net buyers of gold for the first time in 22 years. And last quarter it was reported by the Financial Times that the world’s wealthiest families are also switching to gold. “Two-thirds of the 100 respondents to a survey by the Family Office Channel, a new website, said that super-rich families are now more likely to invest in gold and other commodities.”

“Since 1974, when restrictions on Americans’ owning gold were lifted, stocks have actually done a better job beating inflation than gold has.”

HTTTAN: You’re kidding, right? You actually know someone who has held a stock since 1974? I suppose we could contact Warren Buffett and get a couple names. Otherwise, get real: there’s a time for everything, and right now is clearly the time for precious metals.

► Doug Casey made a fortune investing in gold stocks in the mid-‘90s during a mini bull market in gold. Generational wealth was created during the late ‘70s gold run. I have colleagues that have already retired from gains they made in gold stocks this past decade.

“Ask yourself how long this delirium can last.”

HTTTAN: Until people like you start telling readers to buy gold, that’s how long. And, delirium? Tsk-tsk, your envy is getting embarrassing.

►There has been little involvement by the general public in the current gold bull market. While there are many examples of this, perhaps the best one is that your magazine doesn’t recommend buying it and really never has. And when you finally do, that will be my signal to start selling. I might as well thank you now.

There’s actually more, but you get the idea. When I finished the article, I couldn’t help but wonder what Bert is really trying to sell us here. He’s clearly either biased, blind, or bought.

Because otherwise, he truly does meet the definition of my Grandma’s favorite word.

In spite of our flip comments, we take investing in gold and gold stocks very seriously at Casey’s Gold and Resource Report. If you aren’t yet invested in precious metals, now is an excellent time with prices recently cooling off. Get the names of the top performers in the chart above and all our current recommendations with a risk-free 3-month trial subscription, for only $39 per year. Click here for more.

$GLD – “popped to other side of 107 node, if holds, then maybe we can get rotation up 110 t/l or 111.5 node”

FREE GLD Trading Report Here