Gold was firmer on Monday, tracking a climb in crude oil prices on the back of burgeoning tensions in the Middle East, although it retreated from earlier highs as oil gave up some of its gains.

Weakness in the dollar is also supporting gold, while a slide in the value of sterling to a record low versus the euro helped to take the precious metal to a new all-time high when priced in British pounds, according to Reuters data.

Spot gold reached a session high of $889.55 an ounce, its strongest level since Oct 10, but eased to $875.20/877.20 by 1422 GMT from $866.80 late in New York on Friday.

In sterling terms, gold hit a new all-time high of 605.07 pounds an ounce, up from 592.40 pounds on Friday. U.S. gold futures for February delivery climbed $6 to $877.20.

“Gold is following

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All eyes are on the oil futures market today. As governments and industries across the globe adjust for drastically lower oil prices, investors are anxious to see how the crude market will react to the growing conflict in the Mid-East.

So far today, crude prices have jumped by near double-digit proportions, creating at least a temporary layer of support around the $40 per barrel level. As tensions increase along the Gaza Strip and Israel threatens with a strong and sustained ground attack, futures traders have all the ammunition they need to send prices higher… at least temporarily.

For fast-moving investors, the action has created a trading opportunity. Shares of the world’s largest oil producers opened higher thanks to a jump in crude prices. Exxon Mobil (NYSE:XOM) is up by just under two percent. Chevron (NYSE:CVX) and BP (NYSE:BP) are up by similar proportions.

A move of one

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This morning, we are seeing gold build on its sizeable gains from last week, and oil is up as well. The reason for the move in oil is simple: The explosive conflict in the Middle East is acting as a catalyst on an oil market that was already deeply oversold.brimg style=WIDTH: 480px alt= src=http://local.content.compendiumblog.com/uploads/user/7e88b461-578b-47f3-88ec-038e212ad053/aa0ff38d-9bb9-44a5-bba5-8be30d8f6977/dailyoil1.png _width=75 _height=75brHere is some of the news driving oil this morning ...br A href=http://us.rd.yahoo.com/finance/news/topnews/*http://biz.yahoo.com/ap/081229/oil_prices.htmlSTRONGOil jumps above $40 on Gaza conflict/STRONG/A: Tensions generated by a widening conflict between Israel and Palestinian militants sent crude prices up sharply to above $40 a barrel Monday, with gasoline and heating oil also making sizable gains.br Defense Minister Ehud Barak said A href=http://www.bloomberg.com/apps/news?pid=20601087sid=aX1tMtYlUNBkamp;refer=homeSTRONGIsrael is fighting a “war to the death” with Hamas/STRONG/A, the group that controls Gaza. Prices also advanced as China, the world’s second-biggest energy consumer, said it will supplement its emergency oil stockpiles while prices are low, and the United Arab ...

In the energy market Monday, oil prices declined, with crude for January delivery closing at $44.51/barrel, down $1.77. January reformulated gasoline lost 4.31 cents, to $1.0369/gallon.

Despite the prospect of production cuts from OPEC tomorrow, the oil market “is doubting that OPEC can do what they say they will do,” said Phil Flynn, of Alaron Trading. Besides, he added, “The market is [also] saying that even if OPEC can cut production, in a slowing economy will anyone buy it?”

Nimit Khamar, an analyst at Sucden Financial, wrote that a 2 million barrel cut may be in the cards. “OPEC needs to show their commitment to bringing markets back in equilibrium and prevent a supply glut,” Khamar said. Less than that “may not be enough to calm markets and prevent prices falling back towards recent lows.”

Russia, which isn’t an OPEC member, will attend the cartel’s meeting this week as an observer. It

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OPEC in agreement on need for deep supply cut… Saudi Arabia has cut supply by 8 percent - OPEC president… Russia offers OPEC “concrete support”

Oil topped $50 a barrel on Monday, boosted partly by expectations OPEC will agree on a deep supply cut this week to try to prop up prices.

A weaker dollar also lent support to oil, which has fallen about $100 from a record high of more than $147 in July, as the global financial crisis has hit demand for fuel.

Goldman Sachs has predicted oil could go as low as $30.

U.S. light crude for January delivery rose to as high as $50.50, topping the $50 line for the first time since early December. It was trading $3.00 up at $49.28 by 1421 GMT.

It has rebounded by more than 20 percent from a 4-year low of

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Some commodities are due a strong rebound, says Manraaj Singh. The underlying fundamentals are largely unchanged from July, when many resources were posting record highs. Manraaj says crude oil prices could double by the end of 2009, while agricultural prices will also soar.

This from Fleet Street Invest:

Just a few months ago it seemed like the whole investment world was jumping onto the commodities bandwagon. Now it seems that they can’t jump off fast enough.

The benchmark Reuters/Jefferies Commodity Index has now fallen by 51% from its peak in July (see chart below).

But as I’ll explain in a moment, commodity prices are set for a rebound. And if you are willing to take a longer term view, this is a once-in-a-lifetime opportunity.

Commodity prices reflect future expectations about the global economy. Less business activity and infrastructure spending means less demand for commodities.

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Goldman cuts 2009 oil price forecast… OPEC should make severe output cut, says president… Russia says ready to work with OPEC on output cuts

Oil fell towards $45 a barrel on Friday, after the collapse of a $14 billion rescue for U.S. automakers caused heavy losses across global financial markets and Goldman Sachs predicted oil could fall to $30 a barrel.

U.S. crude oil for January delivery was down $2.95 at $45.03 a barrel by 1119 GMT.

Prices rallied more than $4 on Thursday to a session high of $49.12 a barrel before dropping back in late trading.

Oil sank to $40.50 last Friday, its lowest in 4 years.

London Brent crude was down $2.98 at $44.41.

The plight of the big U.S. auto firms, including General Motors Corp and Chrysler, illustrates the severity of the global economic downturn that

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Jim: You said that oil will go to $100/barrel before it hits$25/barrel. I'm not so sure.

 

The reason I'm confident that the Dow Jones industrial average will top 10,000 before it hits 6,000 is that stocks are a leading indicator. They anticipate recoveries, typically turning upward 6-9 months before the economy as a whole. We are already one year into the recession, so I'm guessing we are getting close to the point where stocks will turn the corner. When you add in the fact that valuations and yields are the most attractive I've seen in my adult investing life, the outlook for equities is quite good.

Oil, on the other hand, reflects mostly immediate, near-term supply and demand. If the economy gets worse before it gets better, stocks might see the light at the end of the tunnel, but oil won't. It can't. Prices will keep falling as demand deteriorates in

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'In coming decades, many forces will shape our economy and our society, but in all likelihood no single factor will have as pervasive an effect as the aging of our population.' Ben Bernanke, Fed ChairmanA key ambition of this blog is to disentangle cyclical from secular economic trends, and discover opportunity where they converge. For example, six months ago the oil market was gripped by hysterical fear regarding the deteriorating secular supply growth trend (although Peak Oil is a political and economic rather than geological phenomenon in my view ie the still plentiful oil is in the wrong places with soaring marginal costs of production). I warned consistently that traders were underestimating cyclical demand destruction, already evident in the US and spreading to emerging markets. That disparity presented a low-risk and hugely profitable shorting opportunity. Now the opposite applies, with prices below marginal ...

In the energy market Thursday, oil managed to gain a little ground, with crude for December delivery closing at $58.24/barrel, up $2.08 on its last day as the front-month contract.

“The stock market has firmed up, which is giving the energy market some strength,” said Phil Flynn, of Alaron Trading. “It’s clear that an awful lot of bearish news has already been priced in.”

The Energy Information Administration’s weekly inventory report, delayed a day by the Veteran’s Day holiday, did little to move the market. Crude stocks were near-flat, rising by only 22,000 barrels, far below the forecast for a 1 million barrel gain.

But gasoline supplies rose by 2 million barrels, more than double the 850,000 barrel estimate.

The Organization of Arab Petroleum Exporting Countries, a subset of OPEC, is scheduled to meet in Cairo on November 29. However, non-Arab members of the cartel, such as Venezuela, Iran and Angola, will be

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