There has been recent speculation as to the future direction and economic significance on the price of gold. Basically, there was a "backwardation" in the futures price that lasted about 48 hours. Since then it has been in a "normal state". Given that we are in the bearish market and everything seems to be hinting to disaster, or so people think, the speculation that backwardation has upon the currency market and governments is indeed dangerous. However, there are others out there that say that this backwardation is nothing to be alarmed about and could be explained in other manners, such as the failure of banks that trade in gold, counter party risk, "hoarding of money", etc.

With the end of the year upon us and to keep the risk and book clean, I would suggest a long opportunity in gold in the short term. Over the last couple of months, GLD has been in a bearish channel, yet has reached a strong support area situated around 68.30 - 68.70 (highs between Feb - April of 2007). RSI is posting a bullish divergence. Expect the price to trade toward the top end of the bearish channel, 86.40. I would use a very short term stop loss at 78.50.