The BOLD Moves Of Gold, And The SHY Moves Of Oil

Gold has had a nine-day winning streak, which was one of its best periods ever, as the dollar value weakened and world markets corrected. On Friday, gold was down $20.70 to $1,171.4/ounce. Gold actually hit an all-time record high of $1,195.80 overnight before selling off to $1,136.40, a huge $60 swing, though it then recovered all of those losses and has now rallied to another new high today of $1225/ounce.

Gold rallied almost 15% in November, which was its best month in ten years. It is time to reassess your position in gold, and you should really take most, if not all, of any profits you may have in this asset class. We are now moderately above $1,200/ounce, and although $1,300/ounce is possible in the short-term, the odds of hitting it are diminishing daily and this is certainly not a time to be putting on new medium to long-term positions.

Also, you must consider the extremely high volatility this asset class has been experiencing, usually a predecessor to a large sharp move down, which I am sure you do not want to be part of. $1,250 to $1,300 potential still exists, but unless we break upwards very shortly, it is not likely to happen. Even if you are a very long-term investor, we still believe and our analysis of the gold markets stress that you have very high odds of seeing a substantially lower price (we have an outlook for gold to hit at least $1,000/ounce, 18% lower in the medium term), which is where you can add to your position.

If gold does retrace back to $1,000 or under like we believe it will, it could become quite disconcerting for you that you didn't take something off the table at these current prices where we are suggesting that you decrease your gold exposure.

US crude oil production is nearing its biggest year-on-year jump since 1970. If the 5.27 million barrels a day of average production level, recorded in the first ten months of the year, holds through December, this year's output will rise 6.4% from 2008, the Platts analysis of Energy Information Administration data showed.

This year's production level will be the highest since 2004, when output averaged 5.419 million barrels a day. Peak oil production was recorded in 1970, when the US produced 9.637 million barrels of oil. All of these fundamentals have yet to be reflected in oil prices. Oil is still following the dollar and it will take a nice dollar and equities breakout for oil to really move and find some direction.