"I thought you may be interested in this article. I sent the note below to my family and a few friends. It depressed me when I first read it. It was easy to feel down in mid-December but it was probably a good contrary indicator. I have attached a PDF of the article in case you want to use it.

"The markets have a much better feel about them for now so I am hopeful that 2012 will be a better year.

"Thanks again for all of your help including your 45 minute effort last Friday. I's a funny thing but I get excited when I see a long audio as your thoughts are always very useful - the more the better."

David Fuller's view Thanks for the feedback and an interesting article by Stephen Watt of The Australian Financial Review, a good paper which I always enjoyed during my many seminar and other speaking tours of Australia in the 1980s and 1990s.

Stephen Watt makes some good points, particularly on page 2. In summarising a key factor which I have mentioned before: to the extent that gold's price is driven primarily by investors, it will behave more like other investments. Gold has often behaved like a safe haven but since last August it has also moved with the so-called risk assets.

Gold's move over the last eleven years to date conforms to a fimiliar pattern for secular bull markets. The biggest uptrends start from a low point as visionary investors recognise value in an oversold market. They are joined by other participants as the price rises, eventually creating a self-feeding bandwagon effect. This becomes a confidence game with plenty of cheerleading in an effort to keep everyone on board. As the price trend accelerates, some of the more experienced participants commence taking profits. When selling produces an atypical reaction relative to what participants have seen over the medium term, confidence erodes and a mean reversion correction occurs.

You have probably witnessed this cycle many times, although usually over a shorter time frame. If it is not yet familiar to you, look at some of the Library's long-term charts.

The analysis of gold (weekly & daily) is tricky today because it has lost its consistency. It is finding support in the region of the 200-day MA, which is encouraging. However, this pattern does not appear capable supporting a renewed bull run at this time. For perspective, look at the 2008 correction. To support another upward leg, we probably need to see a recovery to approximately $1800, followed by a ranging consolidation over several months, eventually leading to another upward break.

Tactically, it has usually paid to buy gold following shakeouts but that strategy becomes more risky at today's higher levels. Fundamentally, I do not see any reason why gold's supercycle should be over when real interest rates remain so low but it is harder to evaluate at these levels. Nevertheless, gold is no longer cheap. I have a friend in New England who owns a jewellery store. He has thrived over the last four years mainly due to the 'cash for gold' business as people sell their jewellery.