Has gold bottomed, or is their more carnage to come? My answer, of course, is that yes, gold has bottomed.

Need proof? Here’s the chart (click to enlarge):

It would appear that the area just above $1,300 is a significant support level, and now that we have spent a week above that level, we should continue to increase from here. The RSI is powering up to the 50 level, which is generally an excellent buy point, and the MACD Histograms at the bottom of the chart have just turned positive, for the first time this year, so it all looks good to me.

We haven’t seen a major follow through in the stocks, yet (although my portfolio did recover 5% this week), with one exception: IMG.TO – IAMGold Corp., a stock we haven’t discussed here since 1997 (click to enlarge the chart):

IMG formed a double top in May and October of last year, but has continued to make a series of higher highs, and this week actually made a new 52 week high.

I haven’t owned IAMGold Corp. for a a few years now, and I have no plans to buy it (presumably because I’m an idiot; a stock making a new high is exactly the kind of stock you should be buying), but it is very important for the health of the overall gold sector that stocks start making new highs. Someone has to lead the sector, and it appears that IMG is taking on that role, at least for now.

A more typical pattern can be viewed in the chart of AEM.TO – Agnico-Eagle Mines Ltd.:

Agnicio-Eagle didn’t “double top”; it made highs in May and October, and then again during the blow off in December. But the higher they rise the harder they fall, and AEM got killed along with the rest of them, dropping from $87.91 on December 6 all the way down to $66.91 on January 24, for a drop of almost 24%. Yikes. A recovery back over $72 is nothing to write home about, but again, a rally has to start somewhere, and I suspect this is where it begins.

My assumption is that the JP Morgan and the rest of the Big Boys spent the month of January hammering the price of gold and silver so they could cover as many shorts as possible, and now they will move to either the sidelines, or the long side, and ride it back up. That’s what they do: ride it down, ride it up, lather, rinse, repeat, over and over.

The weak hands get scared when it drops and sell. They then get excited when it goes up, and they buy. Since we know how volatile this market can be (and a drop of 24% on a blue chip stock in a matter of six weeks is obvious volatility), and since we are convinced that the medium and long term trend is up, the logical strategy is to hold.

I’m not on margin, and I don’t have a million dollars invested in options that will expire next week, so I can wait. I’ll be patient. I am now 87% invested, with only 13% in cash, so I’m poised for a big run up over the next few months. Perhaps I should have more cash on the sidelines, but since I have no need to sell anytime soon, I’ll stay invested and take my chances.

Thanks for reading; stay patient; see you next week.

My comments will be brief, because I don’t know what to say.

On the one hand, here’s a good article from the conservative National Review explaining why President Obama may be just the change we need. I’m a Canadian, and every time I say something bad about Americans and their elected representatives I get lambasted on the Forum, so linking to this article is my attempt to say that yes, Obama may be just what the doctor ordered.

Sometimes a new coach for a sports team improves the team’s performance, just because they are a different coach. Sometimes change for the sake of change is a good thing. Given the problems in the market, I hope so.

Of course the other reason for my conciliatory tone is that we Canadians are certainly looking like a bunch of idiots this week. I don’t want to turn this blog into a political commentary, so you can read more here about why we Canadians look like fools this week.

I still continue to believe that the manipulations in the gold market are drawing to a close, and much higher prices will be seen in 2009. Here’s a good article that explains why the Comex gold market may collapse.

Here’s another excellent article explaining gold price manipulation.

Yes, I know, you all think I’m some kind of nut for suggesting that investors will begin taking increased physical delivery of gold from the Comex, and that will causes gold prices to spike upwards. It hasn’t happened ever, so why should it happen now?

Maybe it won’t, but gold has been a store of value for thousands of years, and I believe it will be again.

Okay, one more article, that alludes to increased insider buying of gold shares.

I’m still maintaining a significant cash position, because tax loss selling may be brutal over the next few weeks. Here in Canada I can sell a stock at a loss, and carry that loss back up to three years and apply it against capital gains taxes I have paid in the past. If I have a loser, selling it and getting a tax refund makes sense. (Remember all that money we made and paid taxes on in 2006? It would be nice to recover some of that tax, wouldn’t it?). I’m not a tax expert, but I don’t think Americans can carry back capital losses, but obviously a loss is a loss, so tax loss selling may continue everywhere in December, which means it may be early January before renewed buying makes sense.

Finally, I have an announcement to make.

Obviously this year my predictions, like virtually everyone else’s, have been completely wrong. If I was smart I would have cashed in 18 months ago, and sat on cash. Instead, my portfolio is down huge, as is most everyone’s. So, here’s the challenge for 2009:

I would like you to write one page of predictions for 2009. What will happen with the markets, with gold, uranium, etc? Two weeks from now I will publish a special e-mail address where you can send me your predictions. I will then create a separate, permanent page on this website for your predictions. You can put whatever you want on that page. You can make it as long or as short as you want it to be. You can even put links on the page to other sites of interest.

I will ask you to predict the following levels on March 31, June 30, September 30 and December 31, 2009:

Gold, uranium spot, Dow, S&P, and whatever else you want to predict. You can also include your top stock picks for 2009.

On December 27 I will not write a weekly commentary. I will instead take all of your input and create pages, and then summarize them so we have a consensus of where the group thinks the markets will be in 2009.

More details to follow. Sorry, no prizes, other than bragging rights during 2010.

Feel free to leave your comments on the Forum, and see you next week.