Since our previous look at the spot market last weekend, gold has performed per expectations and has rallied about $12 and already is already at our minimum upside target of $445. We observed last weekend that gold is back above its 20-week moving average and was about to meet up "with a rising wave of [demand] that should be able to carry it back up toward the $445-$450 area before encountering strong resistance."

Now that gold is closing in on $450, what will the next few days hold for the spot market and are the chances good for a move above last December's high?

The latest gold rally comes off the heels of a parabolic-type blow-off move in many key commodities inflation pressure has once again become a watchword. The latest financial news headlines reflect this growing concern over the rising specter of inflation: "Inflation fears push blue-chips southward," read one recent headline and that pretty much sums up the major focus of the financial markets right now. Indeed, the eyes of the investment world are keenly focused on the domestic price inflation picture and as the primary barometer of inflation pressures, gold is about to again taken center stage.

Up until now, though, gold has taken a back seat to the dollar as the center of attention. It won't be until gold challenged last year's high that investor focus will once again shift toward gold since this is the usual course of events. It usually takes something major in the gold market -- such as a benchmark level being tested or broken -- before the mainstream financial press will give their attention to the yellow metal.

To update last week's chart of the London gold fix, you can see the progression of the gold price along the outer rim of the parabolic bowl visible in the daily chart. A newly formed and rather tight uptrend channel should guide the way for gold to reach our secondary upside target of $450-$455 in coming days, perhaps exceeding it. It's at approximately the $455 area (or at $460-ish in the futures market) that the resistance becomes very strong and perhaps too much for gold to contend with before taking a corrective pullback to gather strength before attempting a breakout.

But then again, an emotionally-driven momentum charge that is given additional impetus from investor fears of inflation could well result in a breakthrough above this pivotal resistance even without gold having to take a "breather." In other words, it's too early to count the yellow metal out from overcoming the December high all at once.