WILL GOLD BREAK A $1000 AND HOLD?

Gold has had a nice run of late. Many don't understand it, and many more can't. The best way to describe why so many are unsure of the recent rally is oil. Oil and gold have traded hand in hand for some time now. The marked change worries many. At some point, the two will have to marry up again, but how will this happen? One of two things will happen in the coming months. The first is the collapse of gold prices to come down to the current levels of oil. The second is a recovery in the price of oil that will have it trading somewhere in the $60-$80 range. I would say that oil will move some and gold will move some, but everyone is entitled to their opinion.
Historically it may be tough to believe, but the price of gold has only had two runs in the last four decades. When you pull up the chart, you will see the price of gold steadily move upward in response to gold's price being unfixed from the $35 an ounce range. The price of gold steadily increases until the beginning of the 1980's. At $850 an ounce, the price fires down. This was the end of the first spike and first bubble in this time frame. This bubble was created by very high interest rates, and as these periods usually dictate, inflation. Gold would settle down to the $400 range and through expansive growth in the United States, even go lower.
The part of the equation that is forgotten is that tragic day on September 11th. This day was important, not only in significance, but also in timing. When the planes crashed into the twin towers, it didn't cripple the U.S. economy, it created something much more powerful, fear. The Fed always does things not only due to economic numbers, but also sentiment. When people are scared they don't spend. This can cause the same problem we are having now, only inversed. The banks won't lend now, but when consumer sentiment is bad, people won't take loans. Before 9/11, the United States was ready to raise interest rates, but fear forced them to cut. Adding liquidity in the market makes it easier to obtain loans, this tends to quell fear or at least counter it somewhat. Although many wanted to increase rates with the real estate bubble forming, the Fed was hog tied trying to keep money flowing. The day this started gold was at $286 an ounce, and it already looks to be trying to take out the all-time high of $1003 from March of last year.
Gold has been trading up mostly on the basis of a flight to safety. As investors have gotten out of the crowded US Treasury trade, gold seems to be what is favored. This is another reason gold has been heading up while oil has gone down, but looking out many think inflation is on its way. This could continue a long term bullish trend for gold. No matter how you look at it, the United States looks likely headed for inflation like that of the Reagan years or possibly greater.
Another interesting aspect to this trade is when the GLD (Gold Commodity) is compared to the GDX (Gold Miners). The GDX has been around since June of 2006 so I used this as a starting point. Until November of 2007, these ETFs traded in concert. Shortly thereafter we see a divergence and the GDX started to trade at a major discount to the GLD. This peaked in October of 2008 and has since seen a more symmetrical chart of the two. Two opposing thoughts would dictate your next move. Gold is overvalued at this time would be one. If gold is overvalued, the miners would be trading within the right range. If gold is at its proper value and we see a move to another all-time high, the gold miners should follow suit and see an even larger gain. Since the majority of gold miners bought back their hedges, I believe that the gold miners will head higher even if gold trades within its current range.