Gold prices closed up $70 at $850.50 today – the biggest one-day move since 1980. The precious metal surged has much as $84 during trading, as investors sought safety from tumbling US stocks.

“We have a global financial crisis and nobody has a clear answer, therefore stocks, currencies and debt are being questioned and nobody wants to own a ‘paper’ asset,” said an equity trader at investment adviser Austin Calvert-Falvin to MarketWatch.

Of course, Contrarian Profits readers won’t be surprised by today’s move…

Last Thursday, Smart Commodities UK editor Garry White said gold’s fundamentals would ensure a rebound before long.

This, he said, was primarily because US economic fundamentals were not strong enough to support the recent dollar rally:

The US is swimming in debt and people’s net wealth is falling. Unemployment is rising and the country’s balance sheet would make even the bravest hedge fund manager have palpitations. This will not be fixed any time soon.

Longer-term, the outlook for the dollar is even worse. What will happen when oil is no longer priced in dollars? Next week, finance ministers from Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates are expected sign a deal to set up a Gulf Monetary Authority. This is a precursor to the formation of a Central bank for the oil-rich states surrounding the Gulf.

Plans are to launch a single currency in 2010, but this may be an ambitious targets. But you can be sure this will happen relatively soon. Iran and Iraq already sell their oil in currencies other than the dollar. Once the central bank is formed it is likely that there would be a rapid move to pricing oil in the new Gulf currency.

The longer-term outlook for the oil price is also bullish. There have been no significant new oil finds for decades, with any new finds likely to be in deepwater or the Arctic. This is very expensive to get out of the ground.

Back on September 3rd, gold bug Ed Bugos gave ten reasons why gold would never be as cheap again…

1. Cost inflation slowing down development pipeline, hence future production growth

2. Political risks in frontier countries also shrinking available supplies

3. Faltering global economy persuading central bankers to abandon tightening plans

4. Soaring government deficits

5. Saber rattling between Iran and Israel and other geopolitical tensions heating up

6. Another GLD ETF just listed on Hong Kong Exchange

7. Some countries already experiencing crackup and heightened gold demand

8. Shrinking official gold supply

9. Seasonal trends turning bullish again into the new year

10. Large producer Anglo has yet to cover all its hedges.

What lies ahead for gold?

Bloomberg reports today that London based research firm GSFM predicts gold could reach $950 by the end of the year.

Money Morning’s Martin Hutchinson is a bit bolder. He says gold could easily reach $1,500 in a commodity bounce. He offers 6 ways for how to profit.