This week in gold, with so many people too busy shopping or shoveling snow to be active in the market, we are seeing a great correction in the POG adn Tyhee holding it's own in limited volume. EXCELLENT.

I love it. Because once this correction is over, and the Jan 2010 reality dawns on investors that the recoery is an illusion, and that more stimulus is needed, but interest rates are soon to rise as the bond yield goes up and the bond market weakens... we'll see more of a spike in the US dollar, but we'll also see gold rising too! That negative correlation with the us dollar will change into another solid upleg for gold. It will be a clash of the titans, and the paper tiger has to be crushed by the dollar bear and gold bull. It will be an unfair fight!

It may take two or three cracks at $1220 gold before it gets above that new recent high, just as taking out $1000 took a few attempts (see chart). But then the new floor will be that 1220, and the Dec 2009 cleansing behind us, we can look forward to Tyhee Pre Feas including 1200 gold in one of the scenarios. Compare today with the April 2009 correction after initial high of $1000 (this is GLD, but same shape for POG), that may take till Aug 2010 to get back to break through 1220.

So another few down-days in gold, taking us down to $1000 will be fine, if that's what it takes to put a solid $1000 floor under the long-term POG. Then we'll see gold having risen even with a rise in the US dollar, that rise being a trading phenomenon as we get into another round of crisis and deleveraging.

Imagine how much stronger the summer/fall 2010 updleg in gold will be, with inflation actually occurring rather than merely expected down the road. With the realization that all that 2009 spending did not actually restore the economy, and with the Obama administration being forced to start to cut spending and raise taxes or accept hyper inflation, there will be an atmosphere of financial crisis and palpable fear.

But we also have to expect a rise in the price of oil, in nominal terms, as the US dollar begins it's next down leg in 2010. I hope that Tyhee includes a scenario of $1,500 gold against $150 oil. The economics of that scenario may well be the reality of the actual costs/revenues of initial produciton in 2013-2014. However, the market reaction to the Pre Feas when released in the spring of 2010, based on say $1000 gold and $100 oil, with Cdn dollar at par, (the "$1000 - $100 - $1 baseline) will be the numbers crunched. That will be positive, but I'm watching for the "$1500, $150, $1.15" numbers, should they be included in the pre feas because the Cdn Dollar can't stay at par if oil and gold shoot up.

Happy new year and Merry Christmas to all my Tyhee compatriots.

SKELEG

And for those with an eye on employment, compare US to Canada. Great to be part of a commodities economy rather than a service economy. Downside for Tyhee may be employment costs will rise as unemployment in Canada recoversy in the mining sector even if it's still at 10%-fuzzy numbers / 18% real in the USA:

http://www.mitacstrends.com/