forget deflation .. inflation set to soar .., page-206

Heremes, here's a fundamental explanation for the expanding wedge on your chart and why I think we'll see a higher high and higher low soon (and therefore avoid your $500 gold price target).

In my view, the high volatility in 2008 is due to two huge but opposite forces: hedge fund unwinding of profitable long positions acquired since August 2007; and unprecedented retail demand for physical gold in the second half of 2008.

My analysis of the COMEX futures data suggests that the hedge funds have little unwinding left to do. The retail demand remains and could feasibly increase in 2009.

So I think gold is going up. I'd also suggest that rising prices will entice funds to jump back in on the long side as they did in Aug07. If this happens as I expect it to, then these two forces would be acting in the same direction. Indeed, given the global fiasco we find ourselves in, they could quite feasibly reinforce each other leading to a gold price frenzy similar to 1979/80.

Rowingboat.