Chart produced using Advanced GET End-of-Day

A month ago we wrote for subscribers on four gold stocks we favored. Since then, all four are marginally higher, but the earth has not shaken -- the world has not dramatically changed in the gold market.

And yet, those who rushed into buy bonds because of the impending recession learned this week that such rash action does not always carry immediate rewards. Elsewhere, selected stocks have clawed their way back from distressed levels (hey, Priceline.com is up almost 100% from its lows!), but longer term, there is likely to be little true redemption here.

Maybe someday, gold will win by default. After all, how many assets exist that are the same price as they were 25 years ago? Certainly not anything on the grocery shelves, in the car dealer lots, or elsewhere. Wheat, gold, and silver are the only three commodities that come to our mind. All three have actually gone down in real terms, of course -- priced at levels comparable to when gas was still 63 cents a gallon at the pumps circa 1975. Adjusted for the relenting fall in the U.S. dollar over the last two decades, these commodities are even cheaper from a global perspective. Does this make any sense? Were these commodities that overvalued 25 years ago, or is this a real opportunity in the year 2001? We clearly think the latter. Our cycle work on gold concurs that 2001 should bring some upside price action -- at least eventually.

So we present above an intermediate term picture of gold, with several support and resistance levels noted. Downward sloping wedge formations with low volume almost invariably break higher with time, but patience is still required.

261 basis the February Comex contract is likely the key level we need to hold to keep our perspective decidedly positive.

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Sand Spring Advisors provides information and analysis from sources and using methods it believes reliable, but cannot accept responsibility for any trading losses that may be incurred as a result of our analysis. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, and should always trade at a position size level well within their financial condition. Principals of Sand Spring Advisors may carry positions in securities or futures discussed, but as a matter of policy will always so disclose this if it is the case, and will specifically not trade in any described security or futures for a period 5 business days prior to or subsequent to a commentary being released on a given security or futures.