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Dennis Gartman's phone is telling him all he needs to know about the direction of gold prices. It's been ringing off the hook.

"Everybody wants to talk about gold," said the author of the influential daily market newsletter The Gartman Letter, whose deep skepticism about gold's rally makes him a popular source among business media. His interview requests from major news outlets across North America have increased "tenfold" this week, as bullion edged above $1,000 (U.S.) an ounce.

That degree of popular interest has historically signalled one thing: That prices are about to turn south.

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"It's always the sign of a top. Always."

Gold's latest run at a record high has the gold bugs buzzing, the doomsayers predicting $5,000 and even mighty Barrick Gold Corp. scrambling to gain a bigger piece of gold's price bonanza. But not everyone is convinced that a gamble on a continuation of gold's boom will pay off.

"With gold, you really have to be able to predict where inflation is going, and whether the U.S. dollar will stabilize," said Jim Steel, president and portfolio manager at Polaris Financial, an Ottawa money management firm. "I don't think anyone can say this with any degree of certainty."

Market watchers said gold's latest stab at $1,000 - the third time in 18 months it has reached that plateau - has been fuelled by rising concerns about inflation and crumbling currencies, as the global economy begins to grow again and the world's central banks keep their liquidity taps wide open.

But even many of those who still believe this will keep gold prices high are wondering whether the widespread mainstream excitement over gold is a sign that the fears driving gold haven't been overblown, and that the metal is due for at least a temporary pullback.

"It tells me the public is long [in gold] and will liquidate," Mr. Gartman said. "Everybody is in the same end of the boat."

The Commodity Futures Trading Commission's latest weekly data show that while total outstanding futures contracts in gold have been rising along with the price, the contracts held by speculative traders (essentially reflecting the investment community, rather than buyers and sellers of commercial gold) have been tilting drastically toward bets that prices will continue to rise. Speculative long positions are near record levels, and outnumber short positions by a whopping 9-to-1. It's evidence that the bull bet has become a grossly overstretched bull bet.

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But investor sentiment in the gold market doesn't look nearly so extreme, said Mark Hulbert, editor of the Hulbert Financial Digest. His Hulbert Gold Newsletter Sentiment Index, which tracks investing recommendations among gold investor newsletters, currently has a reading of 25 per cent - indicative of only modest bullish sentiment on prices.

That's far below the 60- to 65-per-cent readings the previous times gold hit $1,000 (in March, 2008 and February, 2009) and even further from the index's record 90 per cent.

"The [gold experts]we track are far less enthusiastic now than they were the previous two times we reached this [price]level," Mr. Hulbert said. "Contrarian analysis suggest we're much better positioned now to continue higher."

While most experts are convinced that exposure to gold remains a sound defensive part of any portfolio, some advise caution with overdoing it. Mr. Steel, for example, maintains gold exposure only through gold-producing stocks in index exchange-traded funds, to avoid becoming more exposed to gold volatility than the broader market is. Gold stocks represent 10 per cent of the S&P/TSX composite index.

"If you put a 5- to 10-per-cent weighting in gold bullion [in addition to equities] you're making a pretty big bet over what the [S&P/TSX]index is already giving you," he said.

"I like gold, but I'm not looking for this hyperinflation," said independent investor and analyst Chris Damas. "It's good to have some [because it acts]as a strong currency. It's good non-Canadian currency exposure."

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Still, some investors are sold on the doomsday predictions - and aren't letting the near-record prices shake their resolve to buy even more.

"I'm loaded up," said Luigi Sain, a Montreal investor. "This puppy's going to blow."

"I believe $1,000 is just another small milestone. You've got to look at the trend."

And if gold should slump from $1,000?

"I'll buy more," he said.

******

Golden nuggets

$1,004.30

Record-high closing price (all figures in U.S. dollars), Nymex gold futures, March 18, 2008

$1,033.90

Record-high intraday price, Nymex, March 17, 2008

3

Number of times gold has rallied to above $1,000 (U.S.) an ounce in past 18 months

66%

Gain in the past three years

Sources: Bloomberg, CFTC, World Gold Council

*****

Gold trading

This year, Questrade clients are mostly buying, not selling gold.

MONTH, 2009

AVG. GOLD PRICE

JANUARY

$859.70

YTD Buying / 5%

YTD Selling / 3%

FEBRUARY

$950.90

YTD Buying / 9.5%

YTD Selling / 7.75%

MARCH

$924.99

YTD Buying / 19%

YTD Selling / 1.75%

APRIL

$890.65

YTD Buying / 13%

YTD Selling / 3%

MAY

$926.46

YTD Buying / 8.25%

YTD Selling / 0.75%

JUNE

$962.26

YTD Buying / 8.25%

YTD Selling / 1%

JULY

$935.75 /

YTD Buying / 4.5%

YTD Selling / 1.25%

AUGUST

$948.59

YTD Buying / 6%

YTD Selling / 2.25%

SEPTEMBER

$992.45

YTD Buying / 2.25%

YTD Selling / 2.25%

THE GLOBE AND MAIL / SOURCE: QUESTRADE

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