Investors were driven into gold’s safe arms by a disappointing unemployment report that was the country’s worst in 26 years. (The unemployment report).

Allen Sykora for The Wall Street Journal reports that December gold peaked at $1,101.90 an ounce, a fresh record for a most-active contract on Comex. December gold eventually settled at $1,097.70 an ounce, while silver was up 11 cents to $17.52. (Can gold ETFs and prices go higher?)

Who’s going to drive gold prices? Although gold is typically driven by economic factors, these days  investors and traders are in the driver’s seat. Many analysts expect the uptrend to stick around for the time being. Eric Lam for Financial Post reports that the seasonal impact that drives gold is also a factor, as September to December has guided gold higher over the past decade. (Gold’s use as an inflation hedge).

Before investing in gold or other commodities, be sure you have a stop loss in place that you can execute when the trend winds down. (How to employ a stop loss).

For more stories about gold, visit our gold category.

• SPDR Gold Shares (NYSEArca: GLD): up 23.7% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 21.9% year-to-date

• iShares COMEX Gold (NYSEArca: IAU): up 23.5% year-to-date

• ETFS Physical Swiss Gold (NYSEArca: SGOL): up 7.3% since inception

The 10.2% unemployment figure is far worse than what economists had expected, and they don’t see any sign of relief until next year. While the pace of layoffs has slowed, the unemployment rate is continuing to climb, reports Javier C. Hernandez for The New York Times.

Unemployment isn’t just as issue here, either; millions around the world don’t expect to see relief in the form of jobs anytime soon. The European Union forecast unemployment in the eurozone to rise to 10.7% in 2010, up from 9.5% this year. Unemployment ranges from 3.5% in the Netherlands to 18.3% in Spain, reports Greg Keller for the Associated Press. In China, the official urban unemployment rate is 4.3% in the third quarter. Brazil’s unemployment was 8.1% in August, almost unchanged from the previous month.

Gold futures have soared to a record $1,100 an ounce today. While some profit-taking briefly sent gold lower, it resumed its course and analysts expect it to continue to move higher, reports Allen Sykora for The Wall Street Journal. SPDR Gold Shares (NYSEArca: GLD) is up about 0.4% year-to-date. (More on gold can be found here).

Businesses slashed inventories for a record 13th straight month in September, although sales rose for the sixth consecutive time. Many hope that improving sales figures will encourage businesses to start lifting production, although a rising jobless rate heightens fears that consumers won’t start spending anytime soon, reports Martin Crutsinger for the Associated Press. (An ETF to play holiday shopping).

The world’s largest insurer, AIG (NYSE: AIG) reported that it was profitable for the second consecutive quarter. Although things have stabilized, the company’s CEO said that earnings will remain choppy while they restructure.  SPDR KBW Insurance (NYSEArca: KIE) is up about 0.6% this morning.

G20 Finance Ministers are meeting this week to discuss financial reform and economic recovery. While these economies have put in place certain policies in order to push along a recovery, they’re not policies anyone wants to keep in place forever. The general consensus is that it’s too soon to reverse the measures, but it’s not too soon to begin talking about when and how it would happen. Government debt in developed G20 countries is likely to reach 118% of annual national income in 2014, reports Andrew Walker for the BBC.

For more stories on the global economy, visit our global ETF page.

One expert says the spot prices don’t matter so much as the long-term trend lines. Does that sound familiar?

According to David Frum on MarketPlace public radio, the spot price is simply what something is trading for at the moment. The overall trend is what truly matters.

The favored hedge of the moment is gold, which has spiked to record prices. To Frum, the record price is a selling indicator. We maintain instead that you can’t fight the trend – when it’s up, it’s up. When it’s heading south, it’s time to employ an exit strategy. (Why gold could go higher).

The markets have seen their fair share of “irrational exuberance” as long as the notion of investing has been around, leading to bubbles. (Keeping your exuberance tempered).

The best defense to fight the possibility of losses is to enter into the market with a strategy. By following a strategy, you can avoid market bubbles, panic selling or herd mentality buying. We watch the 200-day moving average. When a position moves above, we buy; when it drops below, we sell.  (Why does trend following make sense?)

For more guidance on building a strategy and implementing it, check out the The ETF Trend Following Playbook for more advice.

For more stories about trend following, visit our trend following category.

Van Eck

Van Eck now manages about $9.7 billion in assets. Their varied lineup includes about 20 funds that range from gambling companies to alternative energy to the Persian Gulf, reports Ian Salisbury for The Wall Street Journal.

Their strategy involves “nibbling at the edges”  which enables them to offer products that dabble in niche markets that generally aren’t available elsewhere. While both Van Eck and the fund industry giants with which it competes offer narrowly focused funds, the giants tend to offer slates of ETFs that, taken together, cover the entire market. (ETF portfolio basics).

Van Eck’s offerings don’t cover the spectrum, though. They have funds that cover steel, Russia and the gold mining industry, but you won’t find funds aimed at Japan or Western Europe. What most of their ETFs do have, as the company says, is some kind of relationship to “hard assets.” (The benefits of hard assets).

For more stories about ETFs, visit our ETF 101 category.

• Market Vectors Russia (NYSEArca: RSX): up 116.6% year-to-date

• Market Vectors Gold Miners (NYSEArca: GDX): up 36.3% year-to-date

• Market Vectors Agribusiness (NYSEArca: MOO): up 38.9% year-to-date

The Central Bank will keep rates unchanged, but the widening yield spreads between mortgage-backed securities (MBS) and federal agency debt against Treasuries may be an essential factor in determining the Fed’s stance on the direction of interest rates, reports Julie Haviv for Reuters. The Fed will buy $1.25 trillion allotted for its MBS program by the end of the first quarter of 2010. (ETFs to shelter against a weak dollar).

Purchase programs have inflated some securities to the point that investors are beginning to turn to the risk/reward of alternative spread products like corporate bonds. For instance, the yield spread on the 30-year Fannie Mae 4.5% current coupon stood at 1.47% over the 5- and 10-year Treasury blend, says Arthur Frank, director and head of MBS research at Deutsche Bank Securities.

The Fed’s decision ultimately could keep the dollar weak for the time being. To capitalize on continued weakness in our currency, consider some of the following ETFs:

• PowerShares DB U.S. Dollar Bearish (NYSEArca: UDN). UDN is up 7.2% year-to-date. This ETF seeks to reflect the performance of the short side of U.S. dollar – basically, the dollar goes down the fund goes up. (More on UDN and a weaker dollar).

• CurrencyShares Euro Trust (NYSEArca: FXE). FXE is up 5.4% year-to-date. A straight forex play on the appreciating euro. As the dollar depreciates against the euro, the euro gains in strength. FXE tries to reflect those gains. (More on FXE and the euro)

• iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM). EEM is up 54.1 % year-to-date. By holding non-dollar-denominated assets, such as emerging market equities, investors  can hedge against weakness. Emerging market investments get the benefit of the “dollar kicker” since assets denominated in foreign currencies are eventually converted back to weaker U.S. dollars. (More on EEM and emerging markets).

• iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG). GSG is up 12.5% for the year. This fund, like other commodity funds, can be a weak dollar hedge. GSG owns futures for 24 different commodities. (More on GSG and commodities).

• SPDR Gold Shares (NYSEArca: GLD). GLD is up 23.1% year-to-date. Gold is another weak dollar hedge because it’s considered a store of value. The current high supply of the dollar in the economy can result in high inflation and many investors have turned to gold as a way to protect against inflation. (More on GLD and gold).

For full disclosure, Tom Lydon’s clients own shares of EEM and GLD.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Max Chen contributed to this article.

According to market analysts, silver prices have jumped 109% from their 2008 nadir, outshining gold by 26.9% on an annual basis, as stated in CommodityOnline. Analysts are bearish for silver in the immediate short-term, but bullish for the long-term. (Why silver is outperforming).

The high gains in silver are mostly attributed to several things: strong investor demand, industrial demand and China’s appetite for the metal. (What China’s demand means).

Adding silver to an investment portfolio increases the degree of diversification and protects against fluctuations in other asset types, according to silverpa. Other beneficial factors include:

• Economics. Silver and other precious metals have a lower correlation with most common financial assets. This independent movement helps reduce overall portfolio volatility.
• U.S. dollar. Silver provides a “hedge against inflation” and history has shown that it provides a worthwhile hedge as the dollar continues to depreciate.
• Asset allocation. Experts suggest a 10% to 15% allocation of precious metals in one’s portfolio.
• Investing. Buying the physical bullion is appealing, but an investor may also consider the ease of silver ETF trading. If it’s a futures-based ETF, futures contract rolling is handled for you; if it’s physically backed, you don’t have to worry about storage.
• Low price. Silver bullion is relatively inexpensive and it is an asset that is internationally recognized. It’s not known as “the poor man’s gold” for nothing.
• Industrial demand. Industries like imaging, electronics, jewelry, coinage, superconductivity and water purification all utilize silver. Silver is a precious metal, a store of value, a piece for art and an industrial metal. (The duality of silver).

For more information on silver, visit our silver category.

• ETFS Physical Silver Shares (NYSEArca: SIVR): up 24% since inception



• iShares Silver Trust (NYSEArca: SLV): up 51.8% year-to-date



• PowerShares DB Silver (NYSEArca: DBS): up 50.8% year-to-date

For full disclosure, Tom Lydon’s clients own shares of SLV.

Max Chen contributed to this article.

Copper started the week with a new year high and brokers are uncertain as to the cause, reports Andrea Hotter for The Wall Street Journal. Market fundamentals aren’t supporting any strong price gains at the moment. Copper did receive a boost yesterday after the factory orders report. (Where’s copper going?)

• iPath DJ AIG Copper TR Sub-Idx ETN (NYSEArca: JJC): up 107.8% year-to-date

The U.S. Commodity Futures Trading Commission Commitments of Traders report revealed that speculative long positions have hit a high last seen in the beginning of 2006, which means downside risk is accumulating, and the current commodities market is still bullish. Experts and analysts are divided as to how prices will pan out.

• iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG): up 10% year-to-date

China is the largest holder of U.S. debt, with around $1 trillion, and experts are urging China to diversify its currency holdings unless the country enjoys watching its dollar holdings depreciate in value, remarks Andrew Snyder for Today’s Finance News. Another option for China is to exchange some dollars for commodity holdings as a better way to hold value – also, better for commodities investors gazing at those price upticks.

• PowerShares DB U.S. Dollar Index Bearish (NYSEArca: UDN): up 7.4% year-to-date

Natural gas inventories are almost topped off  with a little more than 3.7 trillion cubic feet – the total country storage space is 3.9 trillion cubic feet. Snyder believes the natural gas market has ridden the commodities bubble and a correction may soon take place as the spot market corrects for the excess inventory. (How to avoid a bubble).

• United States Natural Gas (NYSEArca: UNG): down 57% year-to-date

Keep in mind that these are just predictions. Watch the markets for what really happens, and act accordingly. When investing in commodities, it’s wise to have an exit strategy that involves a stop-loss points that you can execute when the time comes. (How to protect yourself with a trend-following plan).

For more information on commodities, visit our commodity category.

Max Chen contributed to this article.

New regulatory actions in the futures-backed commodities market could pose problems for a variety of popular oil ETFs, including the largest one – United States Oil (NYSEArca: USO), writes Don Dion for TheStreet. Other futures-backed oil ETFs that may be affected by position limits include iPath S&P GSCI Crude Oil Ttl Ret Idx ETN (NYSEArca: OIL) and United States 12 Month Oil (NYSEArca: USL). (What does the future hold?).

In the beginning of the year, the CFTC made inquiries about the impact of USO’s impact on the oil market after prices rushed to a record $147.27 in July 2008 before plummeting to near $30 months later. The providers of USO responded by expanding the period in which it rolled its contracts and reducing its position in the underlying benchmark. USO escaped further notice as investor interest turned from oil to other investments, most notably  United States Natural Gas (NYSEArca: UNG).

Recent restructuring of PowerShares DB Commodity Index Tracking (NYSEArca: DBC) portends possible regulatory action that could result in size restrictions on all futures-based oil ETFs. DBC’s managers restructured its oil weightings and also included oil futures contracts traded in London to avoid CFTC restrictions. The managers of UNG have been turning to the over-the-counter swaps markets to get some exposure. We could see more of these types of things as regulations come forward. (What are swaps?)

Assets in long-only commodity ETFs don’t appear to have been dented by the increased regulatory oversight of futures-based funds. At the end of October, assets in the funds stood at nearly $65 billion – a 12% increase from August.

Dion suggests that novice traders steer clear of oil funds until regulatory revisions are set and those who purchase shares should keep the size of the investment in check. Another option to consider for investors leery of futures-based funds are ETFs that hold shares of oil companies. (How to invest in oil using ETFs).

When investing in oil or commodity ETFs, it is important to have a strategy in place. For a more detailed explanation of using a trend following strategy, take a look at The ETF Trend Following Playbook.

For more information on oil, visit our oil category.

Max Chen contributed to this article.

What’s driving gold prices today isn’t necessarily what drove them 40 or 100 years ago.

• Today, wealth preservation is the key driver for gold investment. Investors want to protect their assets, and gold holds its value, reports Eric Lam for the National Post.
• For most of the last decade, gold has performed well between September and December. Some investors may be considering these seasonal factors.
• The International Monetary Fund (IMF) sold 403 tonnes in September, and rumor has it that China is interested in it.
• India is also stepping up its gold holdings to 558 tonnes, up from 358 tonnes, as it seeks to diversify away from the U.S. dollar.
• In an attempt to revitalize the U.S. economy, the federal government has turned to printing massive amounts of money. The dollar has lost ground against its counterpart currencies, which has led many to believe that inflation is on the horizon.  As we all know, a good hedge against inflation is gold. (Other ways to hedge against inflation).
• Supply is becoming constrained. Of the world’s three biggest gold producers (China, Australia and South Africa), only China has increased production.

What’s the appeal of gold for the average investor? Lakshmi Iyer of Kotak Mahindra Mutual Funds states:

• Gold offers diversity, liquidity, safety and security to investors.
• Gold reduces the risk of losing money in the event that a preferred asset underperforms or when a specific sector is not doing well. (How to utilize precious metals).

For more stories on gold, visit our gold category.

Gaining access to gold is easy  through the use of the following ETFs:

• SPDR Gold Trust (NYSEArca: GLD): up 20.2% year-to-date

• iShares COMEX Gold Trust (NYSEArca: IAU): up 20% year-to-date

• PowerShares DB Gold Fund (NYSEArca: DGL): up 18.4% year-to-date

• ETFS Physical Swiss Gold Shares (NYSEArca: SGOL): up 7.1% since its inception

For full disclosure, Tom Lydon’s clients own shares of GLD.

Kevin Grewal contributed to this article.