Gold Hits New All-Time High

In premarket action, gold has hit new all-time highs, and looks poised to test about the $1,150 level. While top callers have been missing the majority of this latest move in gold, those who have held onto core positions are sitting on nice profits. It's a time-tested lesson in investing: don't try to call tops, especially in bull markets.

The most recent strength in gold has once again been a product of dollar weakness. While everyone was calling for a major countertrend rally that would bring gold down below $1,000, all the dollar could muster was a weak 2% rally. The dollar is headed right back down.

The dollar must rally here, or this has the potential to get disorderly. A retest of the all-time lows in the dollar will likely bring gold to about $1,200. Remember, when the dollar was hitting all-time lows last year, gold was at $1,000. In other words, the move in gold is not purely a function of a weak dollar. We are seeing the beginning stages of a move away from fiat currencies, period. As this crisis develops further, I am becoming more convinced gold will have a major role to play in any new international monetary system.

Once again, I will say that gold should not be trading at $1,115 if we are in an economic recovery and if confidence in our government is robust. Although unemployment has been a "lagging indicator" in only the past 2 recessions, the media has done such a great job of convincing even supposed professionals of this misnomer that the current unemployment disaster is being downplayed. With unemployment quickly rising, and stimulus money set to expire, we will see real soon that our economy is built on a foundation of sand. The most likely response from our government, absent a miracle of fiscal austerity, will be further stimulus and persistently low interest rates. How can you not be long gold right now? If you're not long gold, you're long the government, which, based on the gross mishandling of our economy over the past decade, is a bet fated to end in disaster.