I called what appears to be the bottom in gold. You probably won't believe me, but I wrote the following to my good friend Speedo a few weeks ago:

One thing I'm thinking is that we may have seen a bottom for gold. GLD (the gold ETF) seems to have stopped around $83 and has gone up the last couple days. I've been tempted to buy, given my previous predictions about $850 spot gold (it's near $858 now, but was around $852 on Thursday), and I think it might be a good long-term play given inflation fears and probabilities.

My prediction seems to be bearing out. GLD was over $89 today (spot gold over $900), and looks like it could close near the day's high. Yesterday was a good day too, showing that even on good market days, gold still has the ability to show its luster.

Now, I'm no gold bug. Sure, I believe that if the government tanks and the U.S. dollar goes kaput, then we'll likely have to use the yellow commodity to survive. Heck, carrying barrels of oil around just isn't plausible (not to mention safe!), and every Harsh Realm fan knows that you can buy gas with a few rounds of ammo anyway. But I find it very difficult to believe that the our government will collapse that drastically anytime soon. So, to get around to my point, I'm saying that even though I'm not a die-hard fan of gold, I think it has some climbing to do.

For one thing, yesterday's price action was a bit strange given the general market increase. Typically, gold follows an inverse relationship to the market – if the market's tanking, gold is gonna go up. That relationship may be be more important on a long-term, rather than a single-day, basis. But I think yesterday shows that, even with the market generally getting better, gold is a bit undervalued.

There is, of course, all the inflationary action that the U.S. government has taken (Bear Stearns bailout, giving loans to banks with bad debt as collateral, handing out "stimulus" checks, and so on). I think smart investors realize that down the road these actions are simply going to come back and bite us on the bullion. And who knows what could happen between now and November if it looks like the Republicans might lose the White House. Inflation Nation here we come! (Again.)

But I digress. In the short term, I think gold is going to have some really good up days, with some moderate down days. Or, to put it another way, I think it's going to be taking two steps forward and one step back for awhile. How far will it go? It will have to break through it's 50-day moving average (near $90 for GLD), and from there I'd expect it to go another 5% or so before it hits resistance (near $94 for GLD). From there it might break straight up and go back to it's March highs (near $100 for GLD), or it could fall back down to it's 50 DMA. If it falls back down, I'd expect it to trade sideways for awhile. Here's a chart showing the key supports and resistance.

As always, this post does not constitute a recommendation of any kind. Always do your own analysis, and know your entry and exit points before buying a position.