Not surprisingly Gold (GLD) (and Silver for that matter) is currently rallying from a point of extreme pessimism. However, we do not believe the current rally will be as powerful as the one seen when sentiment was similarly placed back in August.
We believe the Dollar upside will be the 2010 surprise, and not Gold blowing off to $1500. Longer term the jury is still out over the Dollar; however, over the next 12 months we are on the watch for Byron Wien's surprise of it exceeding 100 on the yen and the euro below $1.30 on the Euro as the long slide of the greenback is interrupted.In summary watch this space.
Source Ned Davis Research
Disclosure: We hold a long position in UUP in our model Beacon Master Portfolio