Can gold continue to move higher? The analyst are positive and technically the chart shows a solid move back near the high of $1258 per ounce. The resistance has been a challenge near term and a small pullback may take place before moving higher. My question is more in line with why should gold move higher?

Fear has been one of the primary factors in driving the price of gold higher over the last four months. The financial crisis was the original fear factor in 2008, but the issues facing Europe relative to sovereign debt have weakened the euro and pushed money in the direction of gold. The financial situation worldwide is still not completely resolved, leaving the door open for the fear stimulus to continue.

Inflation is the other primary driver of price. The outlook has projected hyperinflation from a flood of money into the world financial systems as a result of the financial meltdown in 2008. Thus far that has not materialized, but the outlook for inflation remains a part of the pricing structure for now.

The mining stocks have their own risks relative to the cost of mining and the uncertainty of extraction from the ground. The risk is reflected in the stock prices during certain periods of uncertainty. An example was through August of this year, gold had move up 13%, and during the same period the World Mining Index dropped 9.7%. That is quite a discrepancy in pricing. Gold can do nothing as it did for two decades after the run higher in the early 80′s. What if fear subsides and the hyperinflation many expect never materializes? Welcome back to flat pricing or even declining prices.

The outlook is for the price of gold to generate another leg higher. Since 2003 the price of gold has moved from roughly $300 per ounce to the current $1258 per ounce. The fundamental reason for the price of gold to move higher is supply and demand. The common theme among those bullish on gold is demand will outstrip supply based on gold becoming a legitimate currency. A realistic argument and one to watch in the coming months and years.

Gold is at a decision point short term, break higher or test the previous low while remaining in an uptrend. Either way the likely direction is higher. The question is where to buy? Using GLD, SPDR Gold Trust as a barometer for investing, a break above $123.25 would be the first scenario as a break to a new high. The second, a test of support at the $119 mark or 50 day moving average. If it holds and bounces that would be a reasonable entry point. The key will be patience in letting the opportunity play out.

When it comes to the mining stocks, GDX, MarketVestors Gold Miners ETF has hit resistance at the $54.50 level and a break higher would be a reasonable entry point. The key is to be patient and put on your longer term investing hat if you are interested in gold at the current levels. Remember having a disciplined strategy for any investment is vital! Define you entry point, exit point and target before putting your money at risk.