GOLD HITS ANOTHER NEW ALL-TIME RECORD HIGH

Gold and silver are up again, with gold making another new all-time record high. Walter DeWet of Standard Bank said gold and silver prices will remain supported by dollar weakness against the euro. Gold is trading up $25 at $1,171.50 an ounce. That is near the high of the day. Silver is up $.49 at $18.85 an ounce. The dollar is down 65 basis points and oil is up $2. The equity market is also up, with the Dow gaining 170 points in early trading.

Congressman Ron Paul has been making headlines now that his bill to audit the Fed has passed the Financial Committee of the House. Analysts have been saying they think auditing the Fed would create inflationary pressures. This seems rather illogical. In another somewhat illogical situation, Congressman Paul says he will vote against the Bill because it is part of the Financial Regulation Bill, which he disapproves. Nevertheless, the Bill seems certain to pass the House as it has 319 co-sponsors. The way the Bill is written, it may raise some question as to whether it will also allow the congress to order an audit of the U.S. gold reserves. In my view, the reserves should be audited so that we the people know whether we actually have any gold or how much is actually there.

Some analysts are saying that gold made another record run this morning as a result of comments made by the Fed, which put the dollar under pressure and caused investors to buy gold as a greenback alternative. The Dow Jones Wire Service said that options related buying as well as safe haven buying on geopolitical tensions also helped gold. Given the performance of gold, one has to question the stability of the geopolitical situation. If there is a dust-up between Iran and Israel or the U.S., this could really ignite the gold market. With gold now knocking on the door of $1,200 an ounce, that level seems likely to be hit within the week. Infact, Dow Jones Wire Service reported, "Gold could rise to $1,200 an ounce this week because of the large open interest of call options with strikes at $1,200 an ounce." They added that the closer gold gets to $1,200 the more short-covering option sellers and shorts will have to do. Therefore, the buying may really come out of the woodwork in an effort to protect positions.

With huge players in the investment communities such as Einhorn and Paulsen buying enormous quantities of gold totaling billions of dollars, and with Paulsen planning to open a new gold fund in January, it would appear that the odds are that the gold market will continue to move substantially higher. Forecasts of $1,300 to $1,500 do not seem out of the question any longer. They seem like reasonable targets for next year.

Given the powerful up move in the gold market, investors should consider owning gold at these levels. Mark Faber said last week that he thinks gold is a better value today than when it was at $300 an ounce. He said he sees upside potential to $5,000. A number of other analysts have been using similar price targets, including an analyst from Société Générale, which forecast that gold could hit $6,300 an ounce over the next three years. If these analysts are correct, the upside potential is phenomenal. Gold is now up well over 50% in the past 52 weeks and it is up over 30% this year alone. Silver is also strong, having posted similar gains. Dow Jones Wire Service said, "Comex December silver strong, eyes $19."

In the economic data, the government reported that October existing home sales rose 10.1%. However, this should not be given too much weight as these numbers are heavily adjusted at this time of the year. Nevertheless, if the economy begins to recover then inflationary pressures will be unleashed and this also could be bullish for the gold market.

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