"First, thank you for a wonderful service. I feel very fortunate to have found it.

"My question may well be premature but as a happy holder of bullion, I try to remain alert for potential ending signals.

"I recall you mentioning several times the "rhythm" of gold price. First, making steep gains in a relatively short period of time, followed by ranging consolidations of approximately 18 months. This would put the next upswing to around September next year. With the gold price improving again, and perhaps making new highs soon, wouldn't that be an inconsistency? My impression is that it might mark the beginning of the last part of this bull trend, acceleration. Your thoughts would be much appreciated."

Eoin Treacy's view Thank you for your generous comments. For those interested in a more detailed examination of gold's rhythm please see Comment of the Day on January 4th.

The Dow/Gold ratio reached a peak near 40 in 1999 which represented the bottom of the cycle for gold measured in terms of its performance relative to the equity markets. Over the intervening decade the Dow Jones Industrials Average has trended consistently lower against gold and in the process unwound the majority of the prior bull market advance. For the ratio to decline any further from its current value, close to 8.5, a significant upward move in the price of gold and/or decline in the Dow would be required.

The option I view as more likely between the two alternatives is gold fever. There is no evidence of such a mania in the gold price today but I agree that if gold prices in US Dollars sustain a move to significant new highs this year it would constitute a marked change in the rhythm of the decade long uptrend.

A low interest rate environment where investors are increasingly losing faith in the ability of their representatives to preserve the value of their currency, together with diminishing global production are sound reasons for holding gold. However, a mania will require a more compelling reason; either that other assets are losing value or that gold's status as a true store of value becomes a much more urgent issue.

Gold bounced well from the 200-day MA at the end of July. From a bullish perspective, the whole three-month range between $1150 and $1250 could be viewed as a consolidation in the region of the high prior to establishing a sustained breakout.

Personally, I am waiting for the breakout because I failed to buy at a lower level and because the clear leader in the precious metals sector over the last year, palladium, is still labouring below its April peak and while it has sustained a three-month progression of higher reaction lows, it is not displaying the same bullish characteristics that it had before it peaked.