I heard Carusso-Cabrera refer to the purchase of gold as the “fear trade” again, this week. Thanks for expanding on your short term gold forecast which I agree with. What we also have, are countries who through various liquidity measures are devaluing their currencies (another form of inflation) not just the U.S. So, what is your long range forecast for gold?

At every top and bottom, it is always about pyschology. Can you rmember the last time you heard anyone on cnbc or bloomberg say anything negative about gold? But excessive bullish or bearish pyschology can carry any market further. That’s why the technical divergences between gold, and the gold stocks and silver may be indicating that gold is set up up for a correction. That’s all I’m saying. My guess is that after this correction, gold will run higher into the first quarter, along with the stock market.

To the extent that people and countries are buying gold based on inflation, I would suggest they take a look around and notice that credit is still contracting in the real economy and that velocity is also contracting. It has been said that inflation is too much money chasing too few goods. What we have is too little money chasing too many goods. The other driver is the supposed increase demand for stuff, once the world economy kicks into gear next year. I expected a V-shaped recovery to take hold last spring. I do not believe it will have the strength to become a self sustaining recovery. That should become apparent next spring. About when the Fed pulls the plug on all its purchases of MBS.

Spoken like a true day-trader. Even if you bought into precious metals, it would probably be through an ETF right?

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/indias-big-vote-for-a-gold-rally.aspx