Although markets are more volatile and uncertain than ever before, investors are realizing that the upcoming flood of economic "stimulus" and currency creation will have one clear, inevitable result: It will send gold higher.

Even in the best of times, it's hard to find a consensus view among market analysts and pundits. In today's historically volatile times, it's even more difficult.

But lately, there are a couple of ideas that most market watchers will agree on: One, that an economic recovery is still far off in an uncertain future and, two, that gold is going higher.

Neither of these predictions are of the out-on-a-limb variety. The rescue plans being frantically enacted in the U.S. and other global economies will have little effect but to expand the world's fiat money supply by stilluncounted trillions of dollars.And in that environment, it's hard to imagine that gold---and other commodities---won't rise in response.

So there's a general consensus that the gold price will continue its upward march.And that, in fact, may be the greatest impediment to it doing so.

Some even put the odds firmly against gold rising amid such bullish optimism. Marketmood watcher Mark Hulbert, for example, recently noted that his index of timing newsletters showed a bullish gold reading of 60.9%.And that level, from a contrarian point of view, predicts a subsequent downturn.

He maintains that the inverse correlation of bullish and bearish sentiment in his gold timing index are over 95% accurate in predicting gold's short-term direction."Unfortunately for those hoping gold's recent rally to continue," he warned,"the conclusion of contrarian analysis is that the metal's short-term trend is more likely to be down."

He delivered this cautionary note on January 27.And only two days later, gold was up another $30. Granted, pointing to gold's subsequent surge upward isn't entirely fair to Hulbert, who makes the reasonable argument that gold has already attracted a lot of buyers, and will therefore have some difficulty converting enough additional buyers to keep fueling the rally.

In fact, the metal is a bit overextended, and is probably due for a rest to regroup.We'll see over the next couple of weeks if it can successfully fight these headwinds.

Short-Term Uncertainty, But Long-Term Clarity

It won't help the day traders that might be reading this, but the further we look backward and forward, the clearer the picture for gold becomes.

Looking over our shoulders, we see that the only thing keeping gold back during this financial crisis has been the strength of the dollar.
It's not a coincidence that gold peaked last March --- at almost precisely the same time that the dollar bottomed. Thus,the ages-old interplay of fiat currencies and gold has remained intact during this period of turmoil.

And looking forward, as we stare in awe while trillions of dollars-worth of new fiat currency is created out of thin air, it seems apparent that the inverse relationship of gold to unbacked currencies will continue, to gold's benefit.

While this may be the most obvious and powerful factor working in gold's favor, another very interesting dynamic is now in play.

As long-time readers know, I've stressed that two factors have supported gold during the bull market that began in 2001: Physical demand from Asia, and "paper" demand from speculative western markets.

When these two forces act in concert, gold has experienced powerful rallies.

Interestingly, a new factor has emerged since last summer to support gold: Western "physical" demand. Gold demand via the ETFs has continually set new records since mid-summer...even as the strong dollar has kept the price of the metal from equaling its March peak.

This is also the time period during which we've seen massive demand for physical gold bars and coins, with soaring premiums and scarce product availability.

(Note: Some will argue whether the gold ETFs can be considered "physical" demand, but when you consider the goals of these ETF investors and the supposed end-effect on the physical market, I think it's appropriate to lump this demand in with investor buying for coins and bullion.)

What has been notably absent during this period is demand from Asia, particularly India. In fact, reports show Indian gold demand slumped by 47% in 2008, as the strong dollar raised the local, rupee-based gold price. Indian buyers are notoriously price sensitive --- it takes some time for that market to become comfortable with higher price levels, but strong buying typically comes in on price dips.

Here's the key: If and when the dollar weakens as we expect, then Western physical demand will rise along with "paper" demand from speculators. At that point, we can also expect Indian demand to recover strongly, an effect that will be exacerbated as the festival season returns later this the spring. So we would then have three major forces acting together to support gold, likely resulting in another very impressive price rally.

All we need to light the fuse is for the dollar to begin weakening underneath the weight of the mountain of new currency now being created. Barring substantial market turmoil that will trap investors in another liquidity crunch, such dollar weakness seems all but assured.

So, long term, the outlook for gold this spring is extremely bullish. And that translates into brighter days for gold mining and exploration stocks --- many of which have already begun to move higher.

Readers of my Gold Newsletter Alert service (and subscribers to the monthly newsletter who have supplied their e-mail addresses to us) have benefited from some short-term opportunities that have cropped up recently.

I expect more of these to emerge in the days and weeks ahead. In fact, I'm looking forward to very exciting --- and profitable --- days ahead for gold, silver and resource stocks.

That's why I've chosen this seemingly unlikely time --- when most investment newsletters are experiencing dramatic drops in subscriptions --- to expand my services. In particular, I'm delighted to announce the addition of Gene Arensberg analyses to this letter.

I've been one of Gene's biggest fans for years, because his research and insights into investment flows --- both physical and futures --- for gold and silver have been unmatched by anyone else. His "Got Gold" reports on ResourceInvestor.com grew to become among the most popular in the entire industry.

Thus, I was ecstatic when Gene agreed to provide his full, indepth reports exclusively to my readers. While excerpts from his research will continue to appear on some free sites, his full reports will be provided exclusively to Gold Newsletter readers.

Gold Newsletter Alert subscribers will have Gene's reports delivered immediately to them, along with my views on our usual weekly schedule and as developments demand. On a delayed basis, his reports will also be archived on the "Members Only" section of our website for all subscribers.

And, his views will typically appear in the regular monthly editions of Gold Newsletter, debuting with this issue.

That's a lot of very valuable information, and it can seem overwhelming at times. But we're entering an historic time for metals and mining equity investors, and it's vital that you keep abreast of the very latest trends and developments. There's a lot of money to be made.

Brien Lundin