I have been essentially fully invested in gold exploration stocks since 1998. Eight years ago I realized that the gold price was declining due to the rising US dollar exchange rate and believed that the dollar could not increase forever. Based on the relative inflation rates of the US dollar and gold, taking into consideration the US dollar exchange rate, I calculated then that the gold price should rise from its trading range of under $300 an ounce to over $700 an ounce.

I had confidence in the analysis and therefore no hesitation investing all my money -- and I really mean "all of it" -- in gold exploration companies. But I also promised myself that when the gold price reached $700 I would abstain from greed and cash out. You can only make money on a successful bet if you cash in your chips and go home; if you stay at the table too long you're likely to give it all back.

Today I believe that a fair price for gold in US dollars is somewhere around $900 an ounce, and rising. Markets most often oscillate above and below fair value and therefore I expect the gold price to exceed my current target of $900 an ounce. Yet I have an obligation to myself and to my family to take some of the money off the table, and that is what I am currently doing. I am rebalancing my portfolio from essentially fully invested in junior exploration stocks to about 50% cash.

Now that I have that off my chest, here is something else to consider: the aluminum price is up 47%, the copper price is up 97%, the nickel price is up 72%, the zinc price is up 126% and gold is up 55% -- and all these increases occurred only in the past six months! This looks like a speculative blow-off. Even if it is, it doesn't mean that metal prices are going to correct on Monday; these things can last a lot longer than most people imagine, but they are risky. Whenever the market runs entirely on either fear or greed it becomes a dangerous place for capital. So even if I had no premeditated intention to sell I would find it very hard not to take some money off the table today. When I see prices act the way they're acting now the contrarian in me screams, "SELL".

Whenever I sell into a rising market the comment I hear most often is "aren't you leaving a lot of money on the table?" Yes, but when the markets become emotionally driven volatility increases and the risks increase. It was easy to buy gold and gold stocks when the gold price was under $350 an ounce, or even $400 or $500 an ounce. But now we are approaching the end game and although I firmly believe that gold could exceed $1,000 and ounce, and possibly multiples of that, I also believe that the risk of being 100% invested is increasing and therefore I have no hesitation selling some of my positions and taking a more defensive stance.