Since March this year, gold has been trading sideways between $900 and $960 with the price of $940 being a key pivotal level. Every time the price trades up to $960, sellers come on to the market, and whenever gold falls towards $940 we see good buying. During the same time, we have seen global equities rebound strongly and oil prices double since their lows this year. And, while there has not been much major news to push the price of gold through the $1000 level, we must not forget that the fundamental forces driving the gold price remain intact. As an investor, you should be aware that one of the reasons for investing in gold is to protect your wealth in times of economic uncertainty and not for turning a small amount of money into a fortune overnight. This will not happen. The key is patience and a long-term view. Although the price will fluctuate from time to time, the smart investor will always look long-term and not get shaken by these short-term price movements. Not only is gold the ideal diversifier for a stock portfolio, it has good diversification properties in a currency portfolio. Since 2001 The Dollar Index which is a widely used index that measures the US dollar relative to a basket of foreign currencies has already dropped more than 30%. (The currencies in the Index include the Euro, Yen, Sterling, Canadian Dollar, Swedish Kroner and Swiss Franc). During the same time, gold has appreciated by more than 300%. With the latest good news on most economic fronts, many investors are asking the obvious question, is the worst over now? All this when U.S. consumer confidence climbed more than forecast and national home prices increased for the first time in three years, signaling government efforts to right the world's biggest economy are starting to pay off. Then, perhaps this rally in global equities may have run into some resistance at current levels. The point is, as all these markets have become interconnected, a change in one of them can influence the trend direction and prices of another. And, when it comes to gold, there has not been much news in one of the other markets to dramatically change the upward momentum. So while traders use the range between $940 to $960, the overall market has been tracking the fluctuations in the price of oil and the value of the dollar. In the meantime according to reports, Russia's gold production has seen a rise of 21% in the first seven months of the year. The reason for this is that several new projects were launched in the eastern parts of the country due to the increase in the gold price of the last few years. Russia is world's fifth-largest gold miner, this year it produced 101.77 tons of the yellow metal between January and July. In the same period of 2008, it produced 84.13 tons. Russia produced about 8% of the world's gold last year and plans to significantly increase this share by developing its reserves. China has recently tied up with several international miners to extract its huge gold reserves. This is a part of a plan to boost output by 30% each year through 2012. And, it appears that the Chinese will soon overtake India as the number one consumer of gold in the world. From the above chart we can se that recently gold has been stuck in a range between $940 and $960, but the pattern, as from July, is a triangular formation. Usually, when the price reaches the apex of the triangle, we can expect a break out. With an ascending formation the tendency is for the break to occur on the upside. I am expecting the price to break to the upside, which means that once it has traded and held above $960, we can then expect a run-up to over the $1000 level. While the price of gold is extremely difficult to predict in the short-term, the long-term trend remains very clear. It is upward. For this reason it is important to include gold in your investment portfolio. There are a number of different ways you can invest in gold. You can buy gold bullion, gold exchange-traded funds (ETF's), futures, options, funds, managed futures, and gold coins. Each offers it's own advantages and risk profiles, and investors can tailor their investments to their own requirements. But whichever method you choose, one of the best ways to own gold is Gold Bullion. Physically owning the metal is the most direct and traditional method of investing in gold. About the author David Levenstein is an investment advisor who brings over 29 years experience of futures,equities, forex and bullion. He has traded equities, futures (commodities, equity indices and forex), precious metals (bullion and coins), for his personal interests as well as for clients. He has worked and lived in Los Angeles, Bangkok, Hong Kong, London and Johannesburg. He used to write his own column Commodity Corner, in MoneyWeek, and The Prudent Investor in ClassicFeel. He has also made appearances on CNBC, Summit TV, and Classic Business. Email: commodity@wol.co.za

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