Goldfinger, the James Bond villain, is probably turning over in his grave. Ever since the price of gold hit a 25-year high of $574.60 earlier this year, the precious metal seems to have hit a roadblock. It has been fluctuating, while failing to signal any discernable trend other than to occasionally spurt on a rise in the price of oil or some new international worry.

This recent lethargy caught the eye of a concerned reader, Helmut Lindt, who sent this e-mail: “Dan,you wrote a favorable column on gold a few months ago, but the metal seems to be stagnating now. Are you still of the same bullish frame of mind? I own some gold shares and would appreciate your thinking.”

For some thoughts, I rang up Leo Larkin, an analyst who has tracked gold for Standard & Poor’s for the past 10 years. His basic message: Don’t panic; hold fast, in fact, you can even fatten your gold holdings. “The gold bugs are going to be happy because the trend is still up,” he says.

Noting that “nothing goes straight up,” the analyst thinks gold now is simply consolidating after its sharp run-up in late 2005 and early 2006. He says gold is likely to move sideways for the next couple of months before resuming its upward trend.

Gold, up markedly in recent years, wrapped up 2005 at $517 an ounce, up 18% from its 2004 close of $438.45. It’s currently trading at around $546.

Although bullish – Mr. Larkin expects gold to approach $600 before year end – he points to rising short-term interest rates as worrisome. Wall Street’s consensus calls for just two more rate increases of 25 basis points each. Mr. Larkin notes that if rates go significantly higher than that, it would be a drag, making gold less attractive than Treasury bills and money-market funds.

Another flashing red light, he points out, would be a sell-off in commodities, such as copper and nickel. Commodity prices have been rising, although irregularly, since 1999 as a result of the consolidation of commodity-producing industries and sustained global economic growth. So a sell-off on this basis would seem clearly possible.

Outlining his case for gold, Mr. Larkin points to such catalysts as lackluster returns on financial assets, strong commodity prices, and favorable supply-demand factors, with mine supply dropping amid rising demand. He further notes that the low level of gold prices seen in the late 1990s led to sharply reduced exploration expenditures, which should lead to flat to lower global production even if the metal’s price were to resume its rise.

Another plus: Greater volatility in the world’s major currencies has increased the attractiveness of gold as a central bank monetary reserve asset. Accordingly, Mr. Larkin believes central banks, gold sellers in the late 1990s, could turn into buyers, especially in Asia and Russia, to reflect diversification out of paper currencies, including the dollar.

In terms of stocks, our gold bull is only recommending two of them – Barrick Gold, the world’s largest gold producer, and Newmont Mining, the second-largest.

One drawback to Barrick is that it still has some of its gold production hedged, which limits its exposure to the spot gold price and is a drag on profits in a rising gold market. On the other hand, Newmont’s production and reserves are totally unhedged, although the company is faced with drawbacks of its own, namely higher costs for current operations and more geopolitical risk than Barrick.

What about exchange-traded gold funds that track the gold market, such as StreetTracks Gold Shares and iShares Comex Gold, which have attracted lots of investor interest?

There are pros and cons. On the plus side, a gold EFT, Mr. Larkin says, entails less risk than a mining company and allows investors to benefit from a rise in the gold price, while avoiding the risks associated with mining companies, such as nationalization of property, reserve replacement, and physical failure of mines. On the other hand, an EFT doesn’t pay dividends and lacks the same degree of capital appreciation potential as a stock.

The bottom line: Don’t let gold’s 2006 bumpy ride encourage you to get off the bandwagon. The gold rush is far from over.

dandordan@aol.com