Gold Watch: How The Next Upswing Will Play Out

In the last 10 weeks gold prices have depreciated 7% and as seen in the above chart, are again testing their 200-day MA: identified by the light blue line. The last time this pivot point was challenged in early November it held but will this time be different? You can see on the daily chart that yesterday this level was probed and as of this post we are at that critical level for a second time. If it gives way, which I think is a good possibility, solid support comes in at $1650, which is a long-standing trend line and a congestion area dating back the last 10 months.

Bears Should Rethink Position
Traders that are currently in bearish trade should consider reversing their position if the opportunity presents itself at that level. My stance is that gaining bullish exposure into 2013 is a great swing-trade opportunity. I think we will challenge the $1800/ounce level next year. My favored plays are bull-call spreads or gaining long exposure via futures with options protection.

As for the global printing presses running on overdrive, I expect gold to continue its appreciation for years to come. The level of inflation that I think is possible if we stay on this course is unfathomable. The trend being higher for over a decade also helps the argument why most investors should have some sort of gold allocation in their portfolio expecting appreciation not today or tomorrow but in the quarters and years to come.