The gold rush is almost over. Amidst the noise of the markets we have articles like this one which try to straddle the fence with the oft repeated mantra that investors should 'diversify' their portfolios to reduce risk. However, they still advise investing at least something in gold. The possibility that we are about to enter a time of deflation where all investment classes could decrease in value has never been entertained by those advocating a 'diversified' portfolio. Sure you'll be diversified, you'll have a diversity of losses.

Then there is a common outright bullish stance that now is the time to enter the gold market because prices will go higher and could go as high as $6,300 to $9,000 an ounce.
This extreme bullish stance is typical of a speculative market high. Many small time investors are entering the market fearful of being left out, we even have internet sales pages aimed at everyday folk with a few dollars to spare urging them to invest in gold NOW!

It is at just this point that traditionally a high is in place and they all get burnt.

If you use the Elliott Wave Principle to analyze markets you have an objective tool which will tell you exactly what any investment class is about to do. What goes up must come down again at some stage, and Elliott Wave helps you pick turning points.

Our stance at The Deflation Times is simple: Cash is King.

"Be very careful," he says. "Don't lose the money you have saved in the markets that are likely to come down in 2010 a long way."

"He's predicting another crash in 2010 that will bring stocks below this year's low. His word to the wise, "be patient, don't rush it" keep your money in cash and cash equivalents for now and wait out this bear market."

October 20, 2009
By Nico Isaac

When prices in a financial market go from Sea Level to Outer Space in a relatively brief time, two scenarios are at work -- and they both start with the letters 'B-U.'

When a precious metal goes from being a popular long-term investment of buy-and-holders to the quick, get-away 'vehicle' of day-traders, two scenarios are at work -- and they both start with letters 'B-U.'

And when the majority of mainstream pundits see a "new paradigm" in which prices continue to rise indefinitely, two scenarios are at work – and, you guessed it, they both start with the letters 'B-U.'

Enter: the recent Gold Rush of 2009, when ALL of the above conditions apply. Everyone from hedge funds to housewives now hustle to hitch their asset wagon to the rising gold star. Which begs this question: Which of the possible two scenarios are at work: B-U-ll --- Or B-U-bble?

Here's the difference: A genuine bull market is driven by a self-sustaining internal dynamic that's reflected by a host of technical indicators. A Bubble, on the other hand, is the result of untenable psychology that could shift at any moment and bring prices plummeting down.

It goes without saying into which category the mainstream experts put Gold: namely, a new bull market that has years, if not decades more to soar. 'Gold Will Hit $2,000 an ounce,' reads an October 8 Market Watch. And -- 'Gold Has More Upside… The metal's bull run is just getting started,' adds a same day Barron's.

I found hundreds of news items which agree about the long-term potential for gold's uptrend. But not a single one could tell me why the rally would continue, other than because the experts say so.

To know whether a diamond is real, it must cut glass. And, to know whether the bull market in gold is real, it must encompass at least one of these FOUR traits:

A surge in demand that outpaces supply
A falling stock market, which raises the 'safe haven' appeal of precious metals.
A real (not imagined) threat of inflation
An increase in value relative to major foreign currencies

Right now, the Gold market can NOT check off a single one of these items. Case in point:

Supply: Demand for gold from jewelry makers – which comprises 60%-70% of the market – has plummeted to its lowest level in 20 years.

'Safe haven' appeal: From its March 2009 bottom, the U.S. stock market has soared 50% right alongside rallying gold prices.

Inflation: As the October 2009 Elliott Wave Financial Forecast (EWFF) notes: An increase in money supply is only inflationary if it is used to RAISE the total amount of credit. This is NOT happening, as both bank credit and consumer credit levels are contracting for the first time since World War II.

A gold rally in other currencies: Again, the October 2009 EWFF presents the following close-up of Spot Gold prices VERSUS Gold denominated in foreign currencies such as the Canadian dollar, the Australian dollar, the euro, franc, pound, and yen since 2007.

The major non-confirmation between these two markets is clear, as is the overlying message: IF demand for gold truly outweighed supply, then its value as measured in other currencies would increase.

The rise in gold is primarily the result of speculation and a falling U.S. dollar. These are exactly the 'untenable' forces that contribute to a Bubble, not a genuine Bull market. The difference is only a matter of time.

For long-term forecasts and more in-depth, historical analysis for precious metals, download Prechter's FREE 40-page eBook on Gold and Silver.

For the first time this year, since the unfolding of the credit crisis, the Dow has reached 10,000. Many investors and economists are hailing the recession as over, and this as latest proof.

But it's not over yet, and the worst is yet to come.

Unbelievably banks and financial institutions are creating new and complicated repackaged debt instruments, part of the process that got us into all this mess, again!

Toxic assets are still toxic. With unemployment and foreclosures still rising, the economy has had only a bear market rally, not a recovery.

Just because the Dow has reached 10,000 does NOT mean it's all over.