When gold took out $1000 about 2 months ago, it was just about a straight (slanted) line up. However, there was no excessive exuberance about gold, just panic about the credit crisis that was causing funds to re-allocate. Therefore, it was not the parabolic ascent that normally marks the end of an interim uptrend.

Further, junior gold mining shares remained in the dumps, which is a sure sign that individual investors were not piling into gold. Instead, the recent trip to $1000 was a sort of mechanical safety reaction.

Then the reaction downward started, and just as mechanically funds exited gold. This continued in three waves and lasted until May 1. While painful, gold stayed above $850 and just a few months ago that was a new all-time high! However, the $1000 level is a big barrier psychologically, and it is not surprising that a reaction would be significant.

Last Friday, May 16, 2008, gold broke through $900.  On Tuesday, May 20, it broke through $920. This confirmed the bottom on May 1 and set up the new uptrend - possibly a continuation of the current interim uptrend.

A seasonal factor that has been evident in the last three interim uptrends is a peaking action in May, with a big reaction in June / July. That may have been pushed forward this time, thanks to the credit crisis. But there is likely a lot more exuberance still to be played out, so a possible scenario this time is a near-term trip back to $1000, some stalling around that level, then a strong move to $1200 and possibly beyond.

In the immediate future, gold is headed to $950, a significant price level to prove it is back on track. A reaction may take it back down toward $900, and probably not that low. But it will break through $950 and touch $1000 again, fairly soon.

The summer may see quite a lot of price action this time. There are two near-term opportunities to get in: the reaction down from $950, and the reaction down from $1000. By fall, the price will be pushing well past $1000 and a likely end-of-year target is $1200.

Some reputable experts are seeing gold at $1500 by year end or early 2009. The fundamental factors supporting that view are considerable. Perception of inflation is taking off, thanks to oil and food prices. Oil may sell off at some point but there is still a growing demand for production that has leveled off. Further bad news from the finance industry will continue to weigh on general equities and the USD. And any eruption in Pakistan or Iran will cause widespread flight to safety.

Is the credit crisis over? Considering that housing prices have likely not bottomed, and that losses from debt instruments are being leaked in larger numbers over time, it seems likely there is more bad news coming. Some estimates place nominal losses in the many trillions, and there are still games being played by the bond rating agencies and the banks, not to mention Freddie Mac. Greed got us here, and there will always be a severe reaction to extreme greed.

At a minimum, there is more bad news coming. But the minimum case is never a likely scenario.