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Due to inflation worries, we have seen new highs for gold in recent trading. Today, gold reached the $1045 mark, which is a new high for the metal. An increase in gold is something I've seen happening, however, I believe it will become even higher in a year or two. Sure, massive government spending and new currency printing brings severe worry for inflation, but I believe this worry is a bit pre-mature. What makes me very nervous about inflation in the future, is that there is such a delay in DEFLATION at this point. No doubt, deflationary signals are here and increasing, but with the recent economic turmoil we have seen the past two years, a deflationary down spiral should have indeed come by now. Government bailouts have slowed this down spiral, but in my opinion, its full existence is inevitable.

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From this massive spending has come speculation of the value of the dollar, which has caused oil and gold to soar. However, in my opinion, our economy remains in deflationary state. Housing prices are continuing to fall, unemployment is on the rise, and production costs are lowering. The only "inflationary" signal we are seeing is massive government spending (which is spawning high gold prices and a low dollar value). History has shown that there is a "lag time" for inflation to begin following the initial influx of money.

GDX and GLD are funds that have performed very well the past few months, however, I believe they have temporarily peaked. I do see gold levels at $13-1400 at some point, but much further down the road, when we see the scary face of hyperinflation. Writing a put on GDX and GLD is becoming very tempting as is picking up shares of DRV or SRS. REITs are feeling more and more pressure as the lack of liquidity remains.