Has Gold Consolidated Above $1000?

This past week’s shoot to $1000 has left many gold bugs shouting from the mountaintops that there will soon be a very severe and very swift correction.  Silver has managed to bust through $17 per ounce as well, so no matter which camp you’re in, it’s a win-win.  But one of the biggest questions out there right now for those who are invested in precious metals is whether or not gold has consolidated above $1000.  An answer to this question would likely provide the answer to a more direct yet equally as important question: will gold stay above $1000 and keep climbing?  Has it found a new benchmark or will it fall back into the $900’s or $800’s.

History and careful study of the markets indicates that gold will likely be on its way back to the sub-$1000 level by October or sooner.  The dollar has recently be devalued and the run up to $1000 has been rather swift, but lacks any real reason besides the possibility of increased hedging by investors and a drop in the dollar.  There are other, less influential factors that may be helping to drive the skyrocketing prices for precious metals this week, but the underlying market direction looks like it may hold steady around the $1000 mark.

Those that argue that gold will fall in the coming weeks have put much importance in the idea that the US Dollar has been falling and is perhaps doomed to be pushed from its pedestal as the world’s reserve currency.  Others point to the fact that industrial demand is still nowhere near what it was for gold or silver two years ago and that the most recent market activity likely represents investor action and not true metal demand.

A real market indicator lies in just waiting it out and seeing where things go in the next month or so.  If gold continues to outperform all of those shorting it, and climbs well above the $1000 range, then it will likely stay in that range for the remainder of the year as the rest of the US economy slowly but surely climbs as well.  If gold falls from its throne at the $1000 mark it will likely act as a tangible signal to many investors, not just those wrapped up in precious metals, that the economy is due for a correction; the first major one since the March climb into the relative stratosphere.

For now it’s just a waiting game.  Without any hard evidence from anyone that the precious metals markets are either about to take off or will fall back down within reach of their 52-week lows, playing these markets will be as tough as ever.  Going into the Holiday season it may just be precious metals that react in a most volatile way to a possible currency or economic shakeup.  The second stage of the recession could show its face later this year or early in 2010.  For those invested in precious metals, it will be a time to witness some real fireworks.