At the end of June we examined at what point gold prices could be considered extreme. This followed research conducted at the beginning of 2008 where we attempted to answer the same question for crude oil. At that time, we stated that for oil prices to be considered extreme prices would need to trade between USD90- USD150/barrel and beyond that range oil prices would move into territory that would represent a bubble.

Given the concerns that the gold market might repeat the price process of crude oil, three months ago we replicated this analysis for gold. We found the results interesting on two fronts. First, on none of the measures under investigation could gold prices be considered extreme at USD1,250/oz. Rather prices would need to hit USD1,455/oz to be considered extreme in real terms.

Second, in terms of a bubble forming the gold price would need to reach USD2,000/oz, Figure 8. As a result, we believe our USD1,600/oz target for gold in 2012 is not excessive given favourable interest rate and exchange rate trends and the appearance of new sources of demand for gold from both the private and public sectors.

Eoin Treacy's view Gold found support in the region of the 200-day MA near $1150 in July and has posted a positive return in 6 of the last 7 weeks. It moved to a new nominal all-time high last week and a sustained move below $1240 would be required to break the two-month progression of higher reaction lows and question current scope for further upside.

Silver has been ranging below $20 for the better part of a year and broke successfully upwards last week. A clear downward dynamic would be required to check momentum and signal resistance in the region of the high near $22.

Platinum has been ranging mostly above $1500 since May and broke successfully above $1600 last week. A downward dynamic would be required to check current scope for additional upside.

Palladium has sustained a progression of higher reaction lows since May and is currently retesting the April highs. A sustained move below $500 would be required to question scope for further upside.