Gold Slightly Higher On Middle East Unrest

Look for Chinese inflation data, due tomorrow. Sings on inflation will be bullish for gold long term but the tightening of the monetary policies could send the metal lower. Market expectation for CPI is 5.3% for January.

In the news, William Dudley, the president of the New York Federal Reserve regional bank stated that the economy “is not yet well”.

“despite the stronger job growth that we expect in the months ahead, we will continue to have a substantial amount of slack in our labor markets that will take time to absorb.”

Among today’s gold analysis, Steven Hansen , thinks if history repeats, we have hit the low for the year, “throwing out 2008 as a special case for all markets, it would appear January 25 will likely be the low price for gold in 2011.”

James Turk agrees with the upside potential of the precious metals and expects that silver will exceed $50 this year.

“Silver is still in stage one.  It won’t advance into stage two until $50 is exceeded, just like gold did not enter stage two until its previous high of $850 was hurdled.”

But if you think it can go either way Jeffrey Dow Jones suggests playing it with options:

• Gold has pulled back a bit lately and sort of stalled out here in the mid $1300′s in search of some support and resistance. I don’t think it chops around here much longer and I think it breaks out one way or another. This bubble could absolutely keep running or it could blow up tomorrow.
• A June 133 straddle will run you about $10 ($5 for both put and call), so that’s $1,000 per contract. Gold has to move 9% either up or down by June to break even, and after that it’s leveraged gravy. If it moves 20% either direction by June that’s a doubling of your money. Yow.

And if you expect the correction will take the metal below $1,300, buying in multiple stages will lower your risk.